Thursday October 31 2019, Weekly News Digest

Thursday October 31 2019, Weekly News Digest

News Comments Today’s main news: Prosper Marketplace Issuance Trust (PMIT) 2019-4 to sell $138M in securities. PeerStreet raises $60M in Series C round. Funding Circle revamps secondary market. ID Finance Crowdcube campaign overfunds. Stablecoin loans surge 38%. Flender raises 75 million euro. Today’s main analysis: Genesis Capital’s digital asset lending snapshot (A MUST-READ). Today’s thought-provoking […]

The post Thursday October 31 2019, Weekly News Digest appeared first on Lending Times.

Thursday October 31 2019, Weekly News Digest

News Comments

United States

United Kingdom

European Union

Other

News Summary

United States

PMIT funds online marketplace lending with $ 138 million (Asset Securitization Report), Rated: AAA

Prosper Marketplace Issuance Trust, (PMIT) 2019-4, is counting on a de-leverage transaction structure that will boost its credit enhancement levels over time, as it seeks to sell $138 million in securities backed by unsecured consumer loans.

PMIT is also utilizing total subordination of 23.79% for the class A notes and 11% for the class B. The deal’s credit support also includes excess spread of about 9.75%, based on a collateral weighted average interest of 14.32%.

PeerStreet Announces a $ 60MM Series C Fundraise and $ 4.25 Billion in New Capital Commitments (Business Wire), Rated: AAA

PeerStreet, a platform for investing in real estate backed loans, is excited to announce it has completed a $60 million Series C funding round. Colchis Capital led the round with a consortium of institutional investors. Existing investors Andreessen Horowitz, World Innovation Lab and Thomvest Ventures also participated.

Some Real Estate Crowdsourced Funding Isn’t Actually Crowdfunding (Propmodo), Rated: A

Some things, such as pool parties and potlucks, are just better the more people that get involved. Another one of those things is participation in real estate investment. The more people that invest, the more capital there is to fuel deals and improve everything from office quality to housing availability. People make money and society progresses. It’s how the market should work.

Santander Enters the Ring, FinTech Charter Roadblock, Recession Checklist (PeerIQ), Rated: AAA

The NY Fed has increased permanent and temporary repo operation offerings from $75 billion to $120 billion and saw strong demand for its offerings.

Source: PeerIQ, Blackstone, St. Louis Fed

Digital Asset Lending Snapshot (Genesis Capital), Rated: AAA

Genesis continues to see sustained growth in its digital asset lending business. In the third quarter of 2019, Genesis added $870M in new originations, breaking our record of $746M set in the previous quarter. As of September 30, 2019, active loans outstanding stood at $450M, roughly flat from the previous quarter despite a significant decrease in Bitcoin’s price.

Originations increased 38.1% QoQ marking a sixth consecutive quarter of strong growth and bringing total originations to $3.1B since we launched the lending business in March 2018. Our loan portfolio largely sustained its value through increased cash (USD and stablecoin) loan issuance, offset by a decrease in the notional value of crypto loans outstanding.

Source: Genesis Capital

See the full report here.

Former Wall Street Traders Warn of Crypto Lending Bubble (Crowdfund Insider), Rated: A

The availability of cheap, cryptocurrency-collateralized loans is growing unsustainably and could induce a crisis, two former Wall Street traders now working in crypto lending have told Bloomberg.

Interests rates for these services started at 11% but now sit at around 5% APR.

Another Credit Bubble Grows: the $ 5 Billion Crypto-Loan Market (Bloomberg), Rated: A

Crypto credit has expanded too quickly and is headed for a blow-up, says a group of former Wall Street traders who are now seeking riches in digital assets. A near $5 billion industry has emerged from nothing just two years ago and the number of loan platforms is rapidly proliferating, according to blockchain data company Graychain Ltd.

Kabbage: The Care And Feeding Of A Fintech Unicorn (Forbes), Rated: AAA

Want to start and grow a tech unicorn — a privately held startup company valued at over $1 billion? You have to target a large market. The Atlanta-based fintech company, Kabbage, has a valuation of $1.2 billion and is on the Forbes Fintech 50 2019.

The use of online lenders among employer firms has grown markedly over the past couple of years — from 19% in 2016 to 32% in 2018, according to the Small Business Credit Survey 2019 Report on Employer Firms, Federal Reserve Banks.

While less than what small businesses borrowed from banks before the recession, small business loans are still a huge market — more than $600 billion lent each year, according to Small Business Lending in the United States, 2016.

More than nine in 10 (91%) of small business owners spend as much as 20 hours per week on cash flow management from handling payroll to invoicing and purchasing inventory, according to a Kabbage survey summarized by Forbes contributor Moira Vetter. Imagine how much more revenue a small business could generate if it had more time to focus on growth.

 

Naysayers Are Unavoidable When Launching Your Business. Here’s Why You Should Listen to Them (Inc.com), Rated: A

Entrepreneurs become successful, essentially, by refusing to do what everyone else is doing, or by doing the thing everyone else refuses to do. But even when you know you’re onto a great thing, it can be difficult to ignore the naysayers and skeptics you’ll encounter on your way to growing a business.

LendingTree Study Reveals the Most Stretched Homebuyers in America for 2019 (LendingTree), Rated: AAA

  • Five of the top 10 cities where buyers are stretching themselves the most are in California. Though there is some speculation that the housing boom in California may be nearing its end, home prices in the state are still high. As a result, many buyers, especially those who don’t work in lucrative industries like tech, will take out large loans to cover the cost of their homes.
  • Since last year, Los Angeles and San Diego have remained the 2 cities where borrowers have to stretch their budgets the most. The leverage ratios in these two cities are 3.91 and 3.64, respectively.
  • Salt Lake City is the place with the highest leverage ratio not in California. A housing shortage is one of the key reasons buyers in Salt Lake may need to stretch their budgets so much in order to be able to afford a home.
  • Like last year, homes in the Rust Belt and the South are the most affordable in the nation. The average home price in our 10 most affordable cities is a bit more than $171,000, which is $90,000 less than the average home price for the whole nation. Furthermore, the leverage ratio in the most affordable cities is 2.25, compared with a ratio of 2.81 for the whole country.
  • Pittsburgh, Cleveland and Detroit are where buyers are taking the smallest loans relative to their incomes. An average leverage ratio of 2.08 could make these cities attractive to potential homebuyers.
Source: LendingTree

Three Ways AI Will Impact The Lending Industry (Forbes), Rated: A

Consider the massive size of real estate lending. The Fed’s

Aura Secures $ 130 Million Credit Facility from Varadero Capital (Business Wire), Rated: A

Aura, a mission-driven financial technology company that offers affordable loans to hard-working families, today announced it has closed a $130 million asset-backed revolving credit facility with Varadero Capital, L.P. This new facility comes during a period of rapid growth for Aura in which the company has provided approximately $635 million in loans to more than 475,000 borrowers at over 1,250 partner locations since its founding in 2014.

Amount Announces Amount Pay (PR Newswire), Rated: A

Amount, a fintech company helping financial institutions reinvent the retail experience, today announced Amount Pay, an installment point-of-sale (POS) financing solution launching in Q1 2020.

Marqeta Announces New Reserve Financing Product (Financial Content), Rated: A

Marqeta, the world’s first modern card issuing platform, unveiled its new Marqeta Reserve Financing product at the Money2020 conference in Las Vegas today, a reserve financing option built into its core platform workflow. Marqeta Reserve Financing is uniquely tailored to the needs of companies struggling with the logistical, practical and administrative burdens of funding a reserve account to launch new payment card programs and keep it actively replenished with funds.

Become, the online platform for SMBs to find and optimize their funding solutions, today announced the closing of a $10 million Series A investment round led by Benson Oak Ventures and Magenta Venture, supported by RIO Ventures Holdings, iAngels, and Entrée Capital. The company has also secured an additional $2.5 million in venture debt from Viola Credit, bringing the total to $12.5 million. The funds will be used to scale up operations in the United States and Australia in order to execute Become’s mission to remove ecosystem friction and enable more SMBs to “become” the businesses they aspire to be.

The current small business lending landscape is fundamentally flawed, with 58% SMBs denied access to funding with no recourse or guidance on how to solve it.

This entrepreneur aims to boost fintech startups in Delaware (Technical.ly), Rated: A

In fact, with 9% of all jobs in the state falling under the fintech umbrella, Delaware has the highest share fintech employees of any U.S. state, according to a report conducted by the Delaware Prosperity PartnershipFirst State Fintech Lab and University of Delaware in June.

At the same time, the number of fintech startups in Delaware is small: There are a few mid-stage companies like Marlette FundingFair Square Financial and Acorns, but early-stage fintech companies are not exactly booming.

Businesses See Costly Decline of Consumer Trust as a Result of Large-Scale Data Breaches According to Annual IDology Fraud Report (Financial Content), Rated: A

IDology, a GBG company, today released its Seventh Annual Fraud Report, revealing the growing impact of large-scale data breaches and fraud on consumer trust and the critical need for businesses to balance the digital consumer experience with strong identity verification processes. The report also found that senior executives believe their companies are still not prepared to combat synthetic identity fraud and mobile attacks. Additionally, the California Consumer Privacy Act (CCPA) is expected to have significant implications in 2020 and many businesses may not be ready to comply.

Five Key IDology Fraud Report Findings:

  • The true impact of data breaches: A decline in consumer trust – 49% of businesses report a decline in customer trust over the past year. Additionally, 46% indicate that increased regulations are a top impact of large-scale data breaches.
  • Fraud vectors are shifting away from point-of-sale (POS) – 58% of businesses report fraud is increasing in their online channels.
  • New fraud threats, synthetic and AI fraud on the rise – 40% of businesses across industries experienced an increase in synthetic identity fraud (SIF) over the last 12 months and 92% percent expressed concern over SIF. The study found 33% believe that the fraudulent use of artificial intelligence and machine learning will be the most severe form of fraud in the next three years.
  • Compliance is an increasing burden – 28% of businesses believe CCPA compliance will be more burdensome than GDPR while 30% believe it will be equally as burdensome. CCPA contains additional rules with respect to identity verification that go far beyond what is required for GDPR.
  • How to thrive in the changing environment  96% of businesses see identity verification as a competitive differentiator. Also, 80% believe accurate address verification is very or extremely important to the identity verification process.
Source: IDology

Varo crosses 1 million customers, with plans to become a bank by 2020 (Bank Innovation), Rated: A

Digital banking brand Varo has 1 million customers, and is pushing ahead with plans to become a nationally-chartered bank early next year, CEO Colin Walsh told Bank Innovation Tuesday.

Varo offers checking accounts, savings accounts and installment loans. Becoming a nationally-chartered bank will help Varo differentiate through an expansion of its product suite, said Walsh. Like other digital-only banks, Varo intends to grow relationships with customers through multiple product relationships and integrations with other platforms. According to the company, 60% of its customers have more than one product relationship with the brand.

The changing shape of bank-fintech partnerships (American Banker), Rated: A

Blend, a fintech that initially specialized in software for mortgage lenders, is expanding into auto loans in the latest example of a startup broadening well beyond its initial area of expertise in an effort to appeal to more customers.

The San Francisco-based firm launched an auto lending product on Monday that is designed to enable consumers to upload documents quickly using mobile devices to get loan approvals faster. It comes on top of two other recent consumer-facing expansions, into home equity loans and deposit account opening products.

Walmart and Green Dot expand relationship, form new fintech program (Talk Business), Rated: A

Walmart announced a new seven-year contract agreement with Green Dot to continue as the issuing bank and manager for the retail giant’s MoneyCard program. The partners also agreed to launch a new financial tech accelerator.

As Digital Transactions Increase, Financial Services and Lending Firms Bear the Growing Cost of Fraud (PR Newswire), Rated: A

For every dollar of fraud loss, financial services companies now incur $3.25 in costs (losses related to the transaction face value for which firms are held liable, plus fees and interest incurred, fines and legal fees, labor and investigation costs and external recovery expenses), up from $2.92 in 2018. This represents an 11.3% year-over-year increase. Lenders see $3.44 in costs for every dollar of fraud loss, up from $3.05 in 2018, a 12.8% increase. Banks and credit lenders, in particular, were found to have the highest costs of fraud, with both percentages jumping double digits since last year – 17% and 16%, respectively.

Trends

  • Expansion of Mobile – There has been a significant increase in the use of mobile channels since 2018, with 73% of financial services (a 66% increase) and 71% of lending firms (an 8% increase) now offering this option to customers. This growth stems primarily from small financial services firms and digital financial services and lending firms now transacting through the mobile channel.
  • More Cross-Border Transactions – International transaction volume has risen among both mid/large-sized digital banks and all digital lenders. However, mortgage lenders have reported a significant drop in foreign transactions, which coincides with a decline in global growth and housing inventory.
  • The Rise of Botnets – A majority of banks reported double-digit year-over-year growth in botnet activity, which appears to at least be related to banks with international business reporting more transactions. Nearly half (47%) of mortgage lenders reported an average increase of 16% in botnet activity since last year. While surveyed firms appear to be aware of botnet activity, they have not been able to adequately prevent it.

Download the 2019 True Cost of Fraud study here.

Urjanet and LevelCredit Enhance Credit Files With Rent and Utility Payment Tradeline Reporting (PRWeb), Rated: A

Despite representing nearly 25% of consumer spend, until now rent, utility, cable, and telecom tradelines have been severely underreported in traditional credit reports, with only about 1% of consumer files currently including rent data and 2.4% including utility data according to FICO. When alternative data is included, it has proven to accurately score more than 90% of thin or no-file applicants, representing a powerful revenue tool that lenders can use to safely expand their markets, increase assets, and build lasting relationships with borrowers.

Urjanet and LevelCredit today announced a strategic partnership enabling lenders, banks, and fintech companies to confidently qualify thin and no-credit file consumers using rent and utility bill payment history. The partnership enhances LevelCredit’s existing rent reporting services with consumer-permissioned payment history from thousands of utility, cable, and telecom providers, helping financial services organizations safely extend credit to a growing number of consumers who aren’t getting the credit they deserve today.

Inside the Groundbreaking Nova Credit-American Express Partnership (Lend Academy), Rated: A

It all started with a cold LinkedIn message back in 2016. The co-founder of the (then) tiny startup Nova Credit, Nicky Goulimis, reached out to an executive at American Express to discuss a potential partnership. It was an audacious move but one that, three years later, has paid tremendous dividends for the company.

Behind Credit Karma’s savings account launch with Jagjit Chawla (Tearsheet), Rated: A

Credit Karma built a wonderful business providing almost 100 million people with free products to help them manage their debt. It was inevitable that they move into the asset side of their customers’ personal balance sheets. Last week, the firm announced a new savings account.

AccountScore and Equifax release new Open Banking credit risk index (Fintech Finance), Rated: B

AccountScore and Equifax have today announced the release of a new credit risk index for the consumer lending sector which allows financial institutions to more effectively understand consumers applying for credit products.

Lendio’s Online Bookkeeping Software, Sunrise, Announces Partnership With WePay (Lendio), Rated: B

Sunrise, a Lendio company, today announced a strategic partnership with WePay, the integrated payments business of JPMorgan Chase & Co. Through this collaboration, Sunrise will provide its small business clients with a new feature called Sunrise Pay, powered by Chase, which gives users immediate access to invoicing capabilities as well as the ability to set up recurring payments.

Cred Appoints Former Netflix Executive to Leadership Team (Valdosta Daily Times), Rated: B

Cred, the leading global digital asset lending and borrowing platform serving customers in over 180 countries, today announced that veteran technology executive Cliff Edwards has joined the company as chief marketing officer to help accelerate understanding of blockchain technology and to promote innovative use cases for digital assets.

United Kingdom

Funding Circle revamps secondary market to boost liquidity (P2P Finance News), Rated: AAA

The peer-to-peer business lender, which saw its average loan part resale time rise to 124 days this month, said that following a recent review, it is introducing a new selling tool on 2 December to improve access to funds.

Funding Circle also announced that it is introducing a 1.25 per cent transfer payment, which will be deducted from the seller’s proceeds and go to the buyer of the loan part.

Funding Circle ditches selling queue (The Times), Rated: A

Funding Circle appears to have listened to complaints from investors waiting for as long as four months to take their money out of the platform.

ID Finance crowdfunding surges past £2m target as investors eye Latam region (UK Investor Magazine), Rated: AAA

ID Finance, the fintech company operating in Europe and Latin America, has surged past its £2m crowdfunding target on Crowdcube and is now overfunding with £2.3m raised from over 700 investors. The Barcelona-based lending-tech scaleup is the second-fastest growing fintech in Europe, according to Financial Times, has enjoyed strong investor demand as it looks to disrupt the LatAm market. The company will continue to take commitments from investors at crowdcube.com/idfinance

Source: Crowdcube

The House Crowd investments now available within a SIPP (P2P Finance News), Rated: A

THE HOUSE Crowd has announced that it is now able to accept investments through a self-invested pension plan (SIPP).

London lending start-up Koyo raises $ 4.9m and already has ‘global ambitions’ (LearnBonds), Rated: A

Digital lending start-up Koyo has raised $4.9m for its plans to sell loans to new migrants and people with thin credit histories.

Business lending platform Trade Ledger raises £1.5 million (Finextra), Rated: A

Trade Ledger, the ground-breaking business lending platform, which automates commercial lending processes for global banks and alternative finance providers, today announces strategic investment in a £1.5M round led by Hambro Perks, to further accelerate revenue growth.

M&S LAUNCHES ‘BUY NOW, PAY LATER’ SERVICE (Independent), Rated: A

Marks & Spencer is the latest retailer to adopt a “buy now, pay later” payment model, in the hope that it may attract younger customers in the run up to Christmas.

The retailer has partnered with Clearpay to launch the initiative, which allows customers to pay for purchases via a series of four instalments paid over a period of six weeks. The payments can be made via a smartphone app.

CashEuroNet, UK LLC’s Enter Into Administration (Global Legal Chronicle), Rated: B

Slaughter and May has advised the administrators of CashEuroNet, UK LLC which entered administration on 25 October 2019.

The company previously traded as QuickQuid.

China

China’s Financial Hub Moves to Shut Down P2P Lending (Bloomberg), Rated: AAA

The regulator in China’s financial center has ordered Shanghai’s more than 40 peer-to-peer lenders to exit the business, people familiar with the matter said, the latest blow to an online industry that’s shrunk by half this year.

Some of the nation’s biggest platforms including Ping An-backed Lufax and Dianrong.com have been told in recent meetings with Shanghai’s financial services bureau to stop issuing new products and to wind down existing peer-to-peer lending services, the people said, asking not to be identified as the matter is private.

European Union

Flender secures €75m funding line, slashes interest rates (The Irish Times), Rated: AAA

Peer-to-peer lending company Flender has secured a new €75 million funding line to provide loans to Irish businesses.

The rate cuts mean that loans of up to €250,000 are now available for SMEs from 6.45 per cent for terms up to 36 months.

Max Crowdfund: A Real Estate Crowdfunding Platform Leveraging Blockchain Technology to Simplify Property Investment (CardRates), Rated: A

In a Nutshell: Blockchain technology has helped many industries innovate in recent years. Max Crowdfund is one company using the technology to make investing in real estate easier and more accessible. The platform also simplifies investment managment for real estate professionals. Through the use of blockchain technology, properties can be tokenized — or broken down into investment opportunities as low as €1,000 — something that can’t be done through traditional real estate investing. Overall, the Max Crowdfund platform makes real estate investing faster, cheaper, and easier for everyone.

CNH Industrial and October signed a crowd-funding partnership agreement to offer digital funding to Small and Medium Companies. (Emergency-Live), Rated: B

CNH Industrial and the fintech lending platform October entered into a partnership agreement in July 2019 to support Small and Medium Enterprises (SMEs) working with IVECO and CASE Construction Equipment brands through the adoption of crowd-lending in France, Italy, the Netherlands and Spain.
International

Crypto Sentiment on the Rise? Quarterly Stablecoin Loans Surge 38% to $ 870m (Forbes), Rated: AAA

Genesis Capital, a subsidiary of Digital Currency Group (DCG), one of the largest investment firms in the crypto sector, has reported a 38% increase in stablecoin loans in the 3rd quarter of 2019.

Australia

Pop Up Tax Shop and Mr Tax Acquired by Queensland Accounting Group (Newsmaker), Rated: B

Mr Tax Refund was incorporated in 2012 and majority-owned by online lender, Paid International. In January 2015, Paid was sold to ASX listed, Money3 Corp Ltd.

India

P2P Lenders Grow Amid A Gloomy NBFC Environment (Bloomberg Quint), Rated: AAA

The 19 P2P lenders have now facilitated disbursals of close to Rs 500 crore, estimate industry executives who say that a good chunk of this growth has come in the last twelve months. While P2P lenders are registered with the Reserve Bank of India, the regulator does not release lending data for these platforms. As such, BloombergQuint could not independently verify the extent of loans given out via these platforms.

Online lender Aye Finance’s profits grew 10x at INR 250 mn in FY19 (IBS Intelligence), Rated: A

Aye Finance Private Limited (Aye Finance) is among the few in the Indian online lending space that has been posting profits for the last two years. The company, which provides micro-financial services, has reported a net profit of INR 250 million during fiscal 2019, a 10x increased from INR 23 million net profit a year ago.

P2P Bitcoin Exchange Paxful Sees BTC/Rupee Trade Volumes Soar by 22% As India Celebrates Diwali (Bitcoin Exchange Guide), Rated: B

As India donned its festive hats to celebrate a whole week of Diwali, the real gift went to the peer-to-peer lending exchange Paxful. It saw the country’s Bitcoin trading volume on its platform reach an all-time high.

Southeast Asia

Digital Financial Services to Generate $ 38 Billion in Southeast Asia, Study Finds (Bloomberg), Rated: AAA

Digital financial services from lending to asset management are expected to generate at least $38 billion of annual revenue across Southeast Asia by 2025, more than tripling from $11 billion in 2019, according to a new study by Bain & Co.Google and Temasek Holdings Pte.

Online lending will comprise about half that total for the region, which houses some of the world’s fastest-evolving internet and mobile industries. Growing smartphone penetration promises to unlock internet-based services such as insurance to more than 70% of an adult population neglected by traditional banks, according to the report.

Indonesian P2P lender Investree close to Series C funding, plans expansion of Islamic business (Salaam Gateway), Rated: A

While celebrating its fourth anniversary this week, the fintech start-up that set the peer-to-peer lending ball rolling in Indonesia is preparing for its third major round of investment, possibly in the next month.

Aside from regional expansion, Investree intends to intensively develop its Shariah-compliant business unit over the coming year.

Golden Gate Ventures, Modalku invest in Indonesian accounting SaaS startup Paper.id (e27), Rated: B

Indonesia’s Software as a Service (Saas) startup Paper.id announced that it has closed an undisclosed amount of Series A funding from Southeast Asia-based venture capital firm Golden Gate Ventures and Indonesia’s P2P lending platform Modalku.

Authors:

George Popescu
Allen Taylor

The post Thursday October 31 2019, Weekly News Digest appeared first on Lending Times.

Thursday October 17 2019, Weekly News Digest

LendingClub

News Comments Today’s main news: Zopa launches tool to compete with credit bureaus. KBRA assigns preliminary ratings to Marlette Funding Trust 2019-4. OnDeck Capital financial results. ID Finance raises 1.7M euro on Crowdcube in minutes. Canada’s fintech adoption rate has doubled since 2017. Today’s main analysis: LendingClub account performance (A MUST-READ). LendingTree’s Personal Loan Offers Report […]

The post Thursday October 17 2019, Weekly News Digest appeared first on Lending Times.

LendingClub

News Comments

United States

United Kingdom

European Union

Other

News Summary

United States

KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2019-4 (Business Wire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2019-4 (MFT 2019-4). This is a $326.27 million consumer loan ABS transaction.

Preliminary Ratings Assigned: Marlette Funding Trust 2019-4

Class

Preliminary Rating

Initial Class Principal

A

AA (sf)

$260,298,000

B

A (sf)

$30,117,000

C

BBB- (sf)

$35,854,000

On Deck Capital Inc. Financial Results Comparing With Consumer Portfolio Services Inc. (Mesa Weekly), Rated: AAA

On Deck Capital Inc.’s volatility measures that it’s 85.00% more volatile than S&P 500 due to its 1.85 beta. Consumer Portfolio Services Inc. on the other hand, has 1.53 beta which makes it 53.00% more volatile compared to S&P 500.

Earnings & Valuation

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
On Deck Capital Inc. 3 0.12 45.93M 0.45 7.99
Consumer Portfolio Services Inc. 4 0.55 13.97M 0.50 7.37

Profitability

Net Margins Return on Equity Return on Assets
On Deck Capital Inc. 1,349,850,114.62% 12.2% 3.1%
Consumer Portfolio Services Inc. 396,042,410.84% 7.6% 0.6%

Global cooling; Upgrade Card (PeerIQ), Rated: AAA

In industry news, Upgrade led by CEO Renaud Laplanche released the “Upgrade Card”. The product is a cross between credit card and an installment loan. How does it work? Every month any new charges on the card transition into an installment loan of 12, 24, or 36 months. Customers can select the default payback period when applying for the card and they have the option to change the term for new charges at any time. Upgrade Card offers true risk-based pricing with a range of 6.49% to 29.99%. LendIt Co-Founder Peter Renton has a nice summary here.

In macro news, the Fed is expected to cut rates for a third time later this month to a range of 1.5% to 1.75%.

Source: OECD Interim Outlook Projections, Blackstone, PeerIQ
Source: WSJ, Cantor Fitzgerald, PeerIQ

New LendingClub Account Performance (Lend Academy), Rated: AAA

In April 2018, LendingClub provided us with $5,000 to open a brand new account. Since then we have been chronicling the status of the account on a quarterly basis. Below are links to the full series of blog posts in chronological order:

Source: Lend Academy
Source: Lend Academy

Personal Loan Offers Report – September 2019 (LendingTree), Rated: AAA

At 1,270 basis points, the spread between the highest and lowest offered APRs offered to the same consumers were especially stark for high-score borrowers.

  • The average spread for those with scores of 760 or higher was 1,270 basis points, amounting to a difference of 58.5% on the average loan amount offered for a three-year personal loan.
  • Consumers with scores between 720 and 759 saw an average offer spread of 1,145 basis points, representing a 49.9% difference in interest paid.
  • For those with scores between 680 and 719, the average spread was 971 basis points, representing a 37.3% difference in interest paid.
  • Borrowers with scores between 640 and 679 had an average spread of 860 basis points, representing a 28.2% difference in interest paid over the three years of the loan.
Source: LendingTree

Kiva Lending Team: Lendio Gives (Kiva), Rated: A

Lendio has provided over 10,000 Kiva microloans through its

Source: Kiva

There’s Never Been a Better Time to Consolidate Credit Card Debt (Credible), Rated: AAA

According to data collected by the Federal Reserve, borrowers who were assessed interest on their credit card accounts paid 16.97% on average during the three-month period ending Sept. 31. But the average rate on personal loans was only 10.07%.

That’s a spread of 6.9 percentage points — an all-time high in Federal Reserve records dating back to 1998.

Apple and Goldman Sachs aren’t reporting Apple Card information to credit bureaus (MarketWatch), Rated: A

Apple and Goldman Sachs have yet to start reporting consumers’ payment information for the Apple Card to the major credit bureaus, a source close to Goldman Sachs confirmed to MarketWatch on Monday. The source later said that the companies will begin reporting to the credit bureaus later this quarter.

Goldman Sachs CEO says Apple Card is the most successful credit card launch ever (CNBC), Rated: B

“In three short years, we have raised $55 billion in deposits on the Marcus platform, generated $5 billion in loans, and built a new credit-card platform and launched Apple Card,” Solomon said, adding “which we believe is the most successful credit card launch ever.”

Rise of fintech weakens law to prevent lending discrimination (Roll Call), Rated: AAA

As online banking threatens to make in-person banking at brick-and-mortar branches as archaic as video rental stores, it may do the same to a 1977 law created to counteract decades of underinvestment in minority neighborhoods.

Fewer branches, more online

While that includes some wholesale banks or limited purpose institutions, like credit card banks, online banking is driving the sector’s growth.

At the same time, the number of bank branches with an obligation under the CRA to provide loans and other services is falling. Branches have declined every year since a peak in 2010, at 99,550, according to data from the Federal Deposit Insurance Corporation. Banks closed 1,700 branches in 2018, dropping the total number to 86,375.

After steadily rising to a peak of $505 billion in 2016, the number of CRA-compliant loans that banks issued dropped in 2017 to $482 billion, according to the Office of the Comptroller of the Currency.

CNB Bank Moves to Revolutionize its Retail Lending with nCino (PR Newswire), Rated: A

nCino, the worldwide leader in cloud banking, today announced that Pennsylvania-based CNB Bank will utilize nCino’s Bank Operating System to digitize its retail lending process from end-to-end to enrich the customer experience.

California has reformed consumer loan interest rates. But will lenders find loopholes? (Cal Matters), Rated: A

Gov. Gavin Newsom has signed into law Assembly Bill 539 by Assemblywoman Monique Limón, Santa Barbara Democrat. The measure sets an annual interest rate cap of roughly 36% on consumer loans from $2,500 to $10,000 made by non-bank lenders.

For the prior 34 years, under state law, the sky was the limit on rates charged for such loans. Last year, 333,416 non-bank consumer loans in the $2,500 to $10,000 range had annual percentage rates of 100% or higher. That represented 40.7% of such loans. In the $2,500-$4,999 range, the triple-digit APR ratio was 55.5%.

DrawBridge Lending CEO Discusses Risk and Compliance for Lending Capital to Bitcoin Holders (Crowdfund Insider), Rated: A

Earlier this month, DrawBridge Lending (DBL Digital), a digital asset lending, borrowing and investment management firm, partnered with Kingdom Trust, a qualified custodian providing a self-directed IRA incorporating several digital assets with property and traditional asset investments.

To be eligible to invest, investors must be eligible contract participants (ECPs), which means they should have a minimum net worth of $1 million. The minimum investment in Drawbridge Lending’s series fund is $1 million, which can be met with the contributions of multiple investors.

There are more than 600,000 millennial millionaires in the US, according to report (CNBC), Rated: A

There are 618,000 millennial millionaires in the U.S. and their wealth is only expected to grow.

Currently, 93% of millennial millionaires have a net wealth between approximately $1 million and $2.5 million, according to the report. Nearly 60% live in either California or New York and they are investing more in real estate than their elder-millionaire counterparts.

The Pros and Cons of Using Peer-to-Peer Lending When Investing in Real Estate (The Motley Fool), Rated: A

Today’s real estate investors have many financing options at their disposal. There are traditional options like government-backed loans, home equity lines of credit (HELOCs), and investment property mortgages. But on top of those, you also have new-age choices like crowdfunding and peer-to-peer (P2P) lending platforms.

Real Estate Earnings: What To Watch For This Quarter (Seeking Alpha), Rated: A

The “REIT Rejuvenation” of 2019 has restored the coveted NAV premium for most sectors, giving these REITs the currency to re-open the acquisition pipeline. This valuation premium has allowed REITs to kick-start external growth, which has historically been responsible for more than half of FFO per share growth across the REIT sector. REITs were net buyers again in 2Q19, buying $12.5 billion in assets while disposing of $6.6 billion. The $5.9 billion in net acquisitions was the largest quarterly “buy” since 4Q17, and we expect this trend to continue into 2020 given the favorable valuation environment. We break down the acquisition activity for each of the REIT sectors later in this report.

Source: Seeking Alpha

AMERICAN FINANCIAL RESOURCES AND FINICITY PARTNER TO SIMPLIFY THE MORTGAGE EXPERIENCE (Finicity), Rated: B

American Financial Resources, Inc. (AFR) announced today it is working together with Finicity—a provider of real-time financial data access and insights, to provide its business partners and their borrowers with a faster, simpler and more secure way to verify assets and income while originating loans.

Roofstock Accelerates Innovation with New Chief Product Officer at the Helm (Yahoo! Finance), Rated: B

Roofstock, the marketplace for investing in real estate, announced the addition of Ketan Babaria to the fintech’s leadership team as Chief Product Officer. Formerly the Head of Product for LifeLock and Capital One’s D3 incubation unit, Babaria will enhance Roofstock’s current offerings and introduce new, creative ideas to accelerate the fintech’s growth and make real estate investing radically accessible.

Director of Operations Joins Fintech Startup LenderClose (DS News), Rated: B

Des Moines fintech startup company LenderClose has welcomed Andrew Deignan as Director of Operations. Deignan will manage the Operations and Vendor Relationships group, ensuring LenderClose delivers the highest level of service to its credit union and community bank lender users.

United Kingdom

Zopa launches tool to dispel “mystery” of credit worthiness (AltFi), Rated: AAA

Zopa, the first ever peer-to-peer lending platform, is launching the tool, called Borrowing Power, as it says that lending decisions and credit worthiness have been “shrouded in mystery” for too long.

The tool, which is free of charge, works by giving Zopa customers a borrowing score between one and ten. Customers are shown why they are given the score and how they can help improve the score.

In the Spotlight with Mario Lupori, RateSetter (Financial Reporter), Rated: AAA

We spoke to Mario Lupori, chief investments officer at RateSetter, about whether there is more consolidation to come in the peer-to-peer market and whether forthcoming regulatory changes will hinder the sector.

Samsung.com partners with Klarna to offer pay later payment plans (IBS Intelligence), Rated: A

Samsung.com has partnered with payment provider Klarna in the UK to provide customers service to make purchases from its website and pay later. The customers will get a convenient and hassle-free way to pay later at Samsung.com.

Klarna: too good to be true for students? (Mancunion), Rated: A

Klarna is perfect in those situations, giving you a ‘try before you buy option’. You can get as many items as you wish, in as many sizes, returning all the items you don’t need before a penny leaves your bank account. There’s no waiting around for refunds to reach your depleted bank account – you only pay for what you actually keep.

Octopus Choice’s P2P loans now available within a SIPP (AltFi), Rated: A

The firm has announced that its P2P investment platform is now accessible within a SIPP wrapper.

Could banks become redundant in the future? (Finextra), Rated: A

P2P lending as it right now stands absolutely no chance in competing with traditional banking, as it requires a bit too much time from the lender’s side.

However, should technology such as Artificial Intelligence be successfully implemented on these platforms, it’s likely that P2P lending will occupy a large percentage of the financial market share.

Starling launches TV ad campaign after reaching 900,000 customers (AltFi), Rated: A

Today Starling Bank will premiere its first TV ad on ITV and Channel 4 during England’s UEFA Euro 2020 qualifier against Bulgaria, and Jamie’s Meat Free Meals.

Celsius Now Offers up to 10% Return on TrueUSD Lending Service (Finance Magnates), Rated: A

Celsius Network, a cryptocurrency lending and borrowing platform, has partnered with TrustToken, the team behind dollar-pegged TrueUSD (TUSD), to offer up to 10 percent interest on four new stablecoins.

Casa Italia to expand its restaurant in Liverpool following £650k loan from OakNorth Bank (Fintech Finance), Rated: B

China

PayPal wants to help Chinese online shoppers buy from overseas (Business Telegraph), Rated: AAA

By the end of this year, Chinese online shoppers will have a new way to buy things from abroad: PayPal.

Despite the tensions between Beijing and Washington, China’s central bank has allowed the US company to take a toehold in the country’s valuable payments market by buying a majority stake of Chinese payments group Gopay.

European Union

Barcelona-based fintech ID Finance secures €1.7 million within minutes on Crowdcube (EU-Startups), Rated: AAA

Barcelona–based ID Finance, a fintech that operates in Europe and Latin America, has raised over €1.7 million in crowdfunding within minutes of its campaign going live on Crowdcube, amidst strong demand from investors. The data science, credit scoring and digital finance company has a target of €2.3 million.

The company has a well established global team and over 3 million users, with over 40,000 new users joining each week. It is on track to double revenues this year to €90 million – up from €13 million in 2017 – and is targeting over €267 million in revenue by 2021, with the goal of becoming the number one digital lending platform in Hispanic and Latino markets.

Fintech exits have raked in €83bn since 2013 amid European funding boom (sifted), Rated: AAA

The sale of European fintechs via initial public offerings or acquisitions has pulled in €83bn over the past six years, according to a new report by Dealroom.co and Finch Capital. This is twice as much as the next biggest category, enterprise software, and highlights the scale of opportunity for investors as well as the growing maturity of the fintech market.

Some of the biggest exits were the €7.1bn flotation of Dutch payments company Adyen and the sale of Swedish start-up iZettle to Paypal for $2.2bn last year.

The same report also estimates that the continent’s remaining private fintechs have an “unrealised” value of €43bn combined, including companies such as N26 and Starling Bank.

Source: sifted
Source: sifted

Which P2P Lending Marketplaces in Europe Accept American Investors? (P2P-Banking), Rated: A

European p2p lending services are growing. And yields of 10+% are achievable on some of the platforms. This attracts international investors.

Here is an overview of 5 services (sorted aplphabetically) that do allow US investors.

Assetz Capital is a marketplace for UK SME and property development loans. The liquid ‘access’ products offer 4.1% to 5.75% interest.

Bondora is an Estonian p2p lending marketplace for consumer loans. The highly liquid Go&Grow product offer yields 6.75%. With other products higher yields of 10+% are achievable.

Estateguru is an Estonian marketplace for property loans. Typical interest rates are 10-12%.

Flender is an Irish marketplace for SME loans. Typical interest rates are around 10%.

Mintos is a Latvian p2p lending market place. A wide range of loan types is offered. The fairly liquid ‘Invest&Access’ product currently promotes around 8% rate. Yields of 10+% are possible with manual and autoinvest.

Europe’s top tech startups to know (sifted), Rated: A

Europe’s startup scene is often overshadowed by Silicon Valley, but the continent is gaining ground with more than 160 tech firms valued at over €1bn.

Klarna
Founded 2005 — Stockholm, Sweden — Unicorn

In 2019 it launched a new $460m fundraising round, giving the company a post-money valuation of $5.5bn and making it the highest-valued private fintech company in Europe. That was a 250% increase on its last valuation at the beginning of the year.

Starling Bank
Founded 2014 – London, UK – Rising Star & Female Led

Led by Anne Boden, Starling has made a dent in the UK’s thriving fintech ecosystem. As of August 2019 the bank has just shy of 800,000 customers, including around 60,000 business accounts. The company says it’s on track to pass a million this year and already has £1bn in deposits.

These numbers are not quite as impressive as Monzo, which boasts 3m customers, or Germany’s N26 with 3.5m.

Greensill
Founded 2011 — London, UK — Unicorn

Former British Prime Minister David Cameron is an advisor to the firm, which is backed by Softbank’s vision fund. The most recent funding round of $800m valued the company at $3.5bn — firm unicorn territory.

Its working finance solution is funded through issuing its own bonds, making it one of the largest bond issuers of the world, with an average of 47 bonds a day.

Nigerian SME Digital Lender Lidya Expands to Europe (Forbes), Rated: A

In an increasing trend where African technology companies are finding a global audience, Nigerian digital SME lending platform Lidya has expanded to Poland and the Czech Republic.

International

London-based finance platform Divido inks deal with US payment company Splitit offering point-of-sale finance (AltFi), Rated: A

Divido, the London-based consumer finance platform which lets consumers take out credit at the point of purchase to help spread the cost of purchases, has signed a deal with US payment company Splitit to offer a monthly instalment option to customers.

4+ INTERNET BANKING OPTIONS FOR GAMING (One Vale Fan), Rated: B

Klarna has become famous among the players in many countries since its creation in 2005. This virtual bank is seductive for its fast transactions and its privacy. The gamblers will remain anonymous when they deposit or withdraw funds utilizing Klarna as a method. In fact, this Swedish company does not ask any personal details or private information. What’s more, Klarna is also an excellent service to the mobile casino allowing the users to move funds at their convenience.

India

How Can Neobanks Potentially Transform SME Lending? (Inc42), Rated: AAA

Neobanking is a relatively newer concept in India as compared to the West, and is still on a take-off mode. However, market experts observe the gradual and steady adoption of Neobanks and credit their fast growth to its lender and SME-friendly characteristics.

IN CONVERSATION WITH CRIF’S ATRIDEB BASU & HOW HE SCALED DATA & ANALYTICS PRACTICE IN INDIA (Analytics India Mag), Rated: A

CRIF is an Italian company, based out of Bologna and caters to more than 6K banks and financial institutions across 30+ countries globally. In India, CRIF has two broad arms – one is the 100% subsidiary (called CRIF Solutions India) – which focuses on consulting, analytics and products and the other is the credit bureau where it has major ownership (CRIF Highmark) – which focuses on multiple services on retail and commercial side.

Asia

Investors Pour Record $ 735 Million Into Singapore Fintech Deals (Bloomberg), Rated: AAA

Investors poured a record $735 million into financial-technology ventures in Singapore in the first nine months of this year, according to research from Accenture Plc, which analyzed data from CB Insights, Pitchbook and Tracxn.

That’s up 69% from the same period a year earlier and exceeds the $642 million raised in all of 2018, the study found. Investments in payments startups and those in lending made up the bulk of fintech fundraising, accounting for 34% and 20% of the total, respectively. Insurance technology deals comprised 17%.

MENA

Region’s P2P lending platform Beehive funds first SME in Bahrain (Statup MGZN), Rated: A

Beehive, the region’s first regulated peer-to-peer lending platform announces that it has funded its first SME in Bahrain.

The funding was granted to Bahrain-based Mira Packaging Factory, which manufactures disposable cups in addition to other food packaging solutions for the GCC, and the African F&B industry.

Canada

FinTech adoption in Canada has increased from 18% to 50% since 2017, according to the EY Global FinTech Adoption Index 2019. Among the reasons driving consumers to FinTech services are better rates and fees (42%), ease of setting up an account (19%) and more innovative products and services (10%).

Authors:

George Popescu
Allen Taylor

The post Thursday October 17 2019, Weekly News Digest appeared first on Lending Times.

Lenders Bet On Artificial Intelligence for Credit Scoring

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention […]

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention to mitigating risks.

Chief among these challenges are low-performing loan portfolios, which are a constant thorn in the side of lenders. For example, European non-performing loans stand above €1 trillion with more than one third of banks having NPL ratios above 10% (ECB, 2017).

This minefield of factors has driven lenders to seek out new ways to increase profits and cut funding costs in order to stay competitive.

Artificial Intelligence in Fintech: Will it take over?

AI is a powerful tool for banks, thanks to its ability to harness vast quantities of data to learn more about customer patterns and behaviors”, says Steve Ellis, head of the innovation group at Wells Fargo.

As powerful as artificial intelligence (AI) is, traditional banking is still heavily reliant on statistical methods that were developed over half a century ago. Lenders determine creditworthiness based on 20+ data points, which leave otherwise worthy customers behind.

Modern machine learning (ML) makes it possible to go much deeper when analyzing data, and allows lenders to extract valuable insights from available data patterns.

According to a McKinsey report, a number of European banks have already replaced the antiquated statistical-modeling approach with machine-learning techniques. The results speak for themselves: a 10% increase in the sale of new products, 20% savings in capital expenditures, and a 20% decline in churn.

Source: thefinancialbrand.com

The data doesn’t lie: Lenders are betting on AI. Evidence of this modern trend can be seen in numerous ‘banks and fintech collaborations’ and AI-based software releases:

  • JPMorgan Chase pioneered a Contract Intelligence platform designed to “analyze legal documents and extract important data points.”
  • American MobileBank deploys AI software to lend to thin-file millennials.
  • Canadian TD Bank uses Layer 6’s AI engine for scoring and cybersecurity.
  • Deutsche Bank came out with new AI-based equities to predict their pricing and volume more accurately.
  • Wells Fargo employs its own AI team to provide more personalized services and strengthen digital offerings.
  • Bank of America Merrill Lynch implements HighRadius’ AI solution to speed up receivables reconciliation for their large business clients.

Logistic regression is no longer the de facto standard

Nine times out of 10, logistic regression is used to build scoring models and solve classification issues. Before it can take over and provide predictive results, there’s an important step of preliminary analysis and data quality control that must be taken. If the dataset contains:

  • imperfect and missing values, outliers and unstructured data;
  • numerical and categorical values (age, income vs marital status, education);
  • raw data that doesn’t fit strict parameters(data with fractions or decimals, etc.)

data analysts will spend days (if not weeks) just to preprocess the data before it can be assessed. Cutting corners and ignoring such data may lead to the loss of valuable insight and incorrect predictions.

How modern AI/ML methods build better risk models

Today, lenders have the ability to collect more data than ever about their clients. In addition to traditional socio-demographic data, this may include transactional data, records from credit bureaus, social media, Google Analytics, as well as other non-traditional sources.

Processing and interpreting this data so that it can be used to issue loans to worthy credit seekers is where modern ML/AI methods give banks the edge they need.

Machine learning techniques like gradient boosting, random forest, or neural networks can better find hidden dependencies in a dataset, which helps to gain more accurate predictions. This assists banks in determining how collected parameters in a dataset should be weighed to predict whether borrowers will consistently repay their loans on time.

This is made possible by data signals, which define significant parameters that affect the power of a scoring model. Depending on the type of business, geography, target audience, and data authenticity, significant parameters may differ. Modern ML can determine which data points contain the desired signal.

Traditional data sources like credit bureaus still remain an important part of the process and provide the data that contain the above-mentioned signal. Unfortunately, they do not cover noteworthy market segments such as millennials, self-employed entrepreneurs, small business owners, immigrants, or the unbanked.

The team at GiniMachine carried out pilot projects to build accurate scoring models with minimal data points and without access to an applicant’s credit history. Some of the most promising and predictive parameters included the applicant’s industry and occupation, the size of their company, the total years they’d been in business, the size of their family, and data from social networks like their overall activity, as well as the quantity and quality of their connections.

The team at GiniMachine has proven that it is possible to capitalize on information about borrowers that is collected from alternative sources to accurately and efficiently assess borrower’s credibility and make effective lending decisions.

Modern ML methods can build more accurate risk models because of their capacity to:

  1. use built-in ‘raw’ data pre-processing tools
  2. find hidden dependencies of arbitrary complexity
  3. harness unstructured, big data, and data from alternative sources

The financial world, and lending businesses in particular, have seen major changes throughout the last few years. Using ML and AI in concert with traditional practices is the way forward for banks that want to remain competitive in the modern world. It’s clear that making good loans to the people of the future requires a futuristic helping hand.

Author:

Dmitry Dolgorukov is a CEO and co-founder of GiniMachine & HES, a technology entrepreneur, and an investor with over 15 years of executive experience in software development and fintech. In 2018, Dmitry was ranked as one of the top 200 Fintech leaders in Europe that contribute to the industry as influencers through action.

 

Monday July 30 2018, Daily News Digest

TransUnion

News Comments Today’s main news: Prosper tops 1 million loans. KBRA assigns preliminary ratings to SoFi Consumer Loan Program (2018-3) Trust. Elevate Credit earnings preview. Zopa CEO on FCA regulatory review. 60 firms apply for Hong Kong banking license. Today’s main analysis: Credit bureau earnings. Today’s thought-provoking articles: FCA to crack down on UK P2P lenders. What to expect in […]

TransUnion

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

Marketplace Lender Prosper Tops One Million Loans (Crowdfund Insider) Rated: AAA

Online lender Prosper announced a new milestone yesterday. The marketplace lending platform topped one million loans this past week representing over $13 billion in originations.

In May, Prosper announced strong loan originations saying the platform experienced a 27% year-over-year increase in the first quarter to $744 million.

The net loss for Q1 decreased by $12.6 million to ($24) million but EBITDA was positive for the fourth consecutive quarter.

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2018-3 Trust (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2018-3 (“SCLP 2018-3”). This is a $546.00 million consumer loan ABS transaction.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2018-3

Class Preliminary Rating Class Principal
A-1 AA+ (sf) $278,000,000
A-2 AA+ (sf) $136,000,000
B A (sf) $69,000,000
C BBB (sf) $63,000,000

In Second Act, a Silicon Valley CEO Opens Up About Affairs (Wall Street Journal) Rated: A

Seeking a fresh start in Silicon Valley, former Social Finance Inc. chief and co-founder Mike Cagney now admits that an affair with a subordinate was a reason for his abrupt departure last year from the firm.

Now, Mr. Cagney is adding another reason for deciding to leave a startup he led for six years. In an interview with The Wall Street Journal, he said that he had consensual sexual relationships with female subordinates, something he had previously denied publicly. He also said he had misled SoFi’s board of directors about one of the affairs.

Sex Scandal Toppled a Silicon Valley Chief. Investors Say, So What? (The New York Times) Rated: A

Yet just months after Mr. Cagney departed SoFi, two venture capitalists who had been on the company’s board and knew many details of his actions invested $17 million in his new start-up, called Figure. Since then, Mr. Cagney has raised another $41 million from others for the lending start-up, which will open soon.

Mr. Cagney’s swift comeback — from ouster to new company took four months — provides one of the starkest illustrations of the speed with which the technology industry is moving past the sexual harassment allegations that swept Silicon Valley and many other industries over the last year.

Highest GDP Growth since 2014, Credit Bureau Earnings (PeerIQ), Rated: AAA

The US economy grew at a blistering 4.1% pace, the highest GDP growth reading since 2014, driven by consumer spending. Consumer spending grew by 4%, higher than economists’ estimates. Consumer spending has been driving US economic growth and outstanding consumer debt has reached all-time highs, although consumer debt per capita is still well below its pre-crisis peak.

Credit Bureau Earnings

PeerIQ’s partner TransUnion released its 2Q earnings this week, along with Equifax. TransUnion’s earnings beat market expectations with revenue of $563 Mn, up by 19% YoY. TU’s revenue growth was driven by Online Data Services, where revenue grew by 23% YoY.

Source: TransUnion and PeerIQ

Equifax’s revenue increased by 2% YoY to $877 Mn in 2Q, while net income decreased by 12% YoY to $145 Mn. Below we compare the latest earnings of the 3 credit bureaus – TransUnion, Equifax and Experian. Note that Experian’s earnings are for the 6 months ending 3/31/18.

Source: Bloomberg and PeerIQ

Elevate Credit earnings preview: what Wall Street is expecting (Markets Insider) Rated: AAA

  • Elevate Credit is reporting earnings from Q2 on July 30.
  • Analysts predict earnings per share of $0.073.

Elevate Credit releases earnings for the most recent quarter on July 30.

9 analysts are estimating earnings of $0.073 per share as opposed to earnings of $0.080 per share in the same quarter of the previous year.

Analysts are expecting the company to report $186.8 million, an increase of 24.13% over the prior year quarter.

5 Ways to Earn a Truly Passive Income (Zing Blog) Rated: A

In recent years, investors have started putting their money into peer-to-peer lending companies. By lending out your own money to peers in the form of personal loans, you are able to earn interest – similar to the way that banks and other lenders produce income. On sites such as Lending Club and Prosper, you can open an account and begin investing in this passive income venture.

Like all investments, the ROI varies, but Lending Club and Prosper boast an average investment return of about 5 – 10%. Both of these platforms also give opportunities for users to make their investment semiautomatic, meaning you wouldn’t need to constantly monitor your investments or reinvest returns. But there would still be some work involved. If you want this to be a completely passive income stream, Lending Club offers a PRIME account, in which you’ll have a fully managed account. You’ll need to have a minimum investment of $5,000, though, and it will be subject to a one-time .8% fee.

85% of Small Business Owners Say They’re Living the Dream (Small Business Trends) Rated: A

According to recent findings from Kabbage, a financial services and data platform, 85 percent of small business owners believe that being your own boss and owning a business is achieving the American Dream. In addition, 84 percent said they hope their children will also one day become small business owners.

The survey, which consists of responses from more than 1,000 small business owners, found that 38 percent of those who hope their children become entrepreneurs feel that way because they want them to turn their passion into a career. 24 percent appreciate that being their own boss allows them to create a flexible schedule. And 22 percent feel that building a small business is rewarding, and they want their kids to feel that sense of pride.

ArborCrowd Wants HNW Investors to Understand the Appeal of Workforce Housing (National Real Estate Investor) Rated: A

ArborCrowd targets IRRs from 12 percent to 15 percent in top-tier markets and IRRs in the mid-teens or low 20s in secondary and tertiary markets, according to Adam Kaufman, co-founder and managing director of the online crowdfunding platform.

MILLENNIUM TRUST COMPANY REFRESHES ALTERNATIVE INVESTMENT PLATFORM (STL News) Rated: B

Millennium Trust Company, LLC, (“Millennium Trust”) a leading retirement and custody services provider to advisors, financial institutions, businesses and individuals, announced today the launch of its enhanced education platform on the Millennium Alternative Investment Network (MAIN). MAIN is a free research, education and alternative investment resource to help investors and advisors increase their understanding of alternative assets, and invest through simplified and streamlined investment processes.

United Kingdom

Zopa CEO Jaidev Janardana Welcomes FCA Regulatory Review of P2P Lending (Crowdfund Insider) Rated: AAA

This past Friday, the UK Financial Conduct Authority (FCA) finally released their reviewof the crowdfunding industry regulations. While the investment crowdfunding sector (equity crowdfunding) came away mostly unscathed the loan based sector (or peer to peer lending) took a bit of a lashing.

The FCA said the peer to peer lending had become “increasingly complex” and sited occurrences of operations that lacked transparency and instances where interest rates were not matched with the appropriate level of risk. The FCA subsequently announced a new consultation as it looks to firm up compliance for UK online lenders. Gillian Roche-Saunders, a partner at the law firm of Bates, Wells & Braithwaite – and Fintech expert, said this will be “the foundation of a much more sophisticated and targeted supervisory approach from the regulator.“

Zopa CEO Jaidev Janardana welcomed the reappraisal and added scrutiny of P2P operations calling it a positive step. Janardana said they “wholeheartedly agree” with the FCA assessment;

Crackdown is looming for peer-to-peer lenders (The Times) Rated: AAA

The City watchdog is to crack down on peer-to-peer lending and the crowdfunding industry amid fears that consumers are being exposed to risks they do not understand.

The popularity of peer-to-peer lending, where individuals or small businesses borrow from members of the public and institutions on the internet, has soared in recent years.

About 150,000 Britons have handed over nearly £10 billion in the past decade through these forums, earning an attractive average of 4.5 per cent interest.

U.K. Watchdog Proposes New Regulations On Lending Platforms (PYMNTS) Rated: A

The Financial Conduct Authority is looking to tighten up oversight over crowdfunding platforms, which provide short-term lending for small businesses and consumers, in part to make sure customers have clear information about the rules, terms and conditions.

A 156-page report by the watchdog found that some customers were subject to poor practices by certain online platforms and that they were provided with unsuitable products and poor treatment.

The reform measures have been backed by platforms like Funding Circle, a leading crowdfunding lender, as a way to gain more legitimacy as competition heats up with traditional banks. RateSetter, one of the three-largest P2P lenders in the U.K., has also sought clarity on regulations as a means to better compete against established banks.

We would remain in EU now, say small companies (The Times) Rated: A

The majority of small companies would vote to stay in the European Union if there were to be a re-run of the Brexit referendum, a survey shows.

A poll of 965 small businesses found that 56 per cent now want to stay in the EU and 32 per cent wish to leave. The remainder were undecided or declined to state their preference.

The survey, which was conducted by Funding Circle, a peer-to-peer lending platform, highlighted a 7 per cent swing towards remaining since April last year.

Tougher P2P lending rules proposed over poor practice concerns (Your Money) Rated: A

The Financial Conduct Authority (FCA) has opened a consultation on loan-based crowdfunding platforms (peer-to-peer) following its original review of the sector in 2016.

It said since then, it’s observed that the new and growing area has become increasingly complex and has found evidence of “poor business practices” that could cause actual or potential harm to investors.

For example, P2P platforms have a much more active role by taking decisions on behalf of investors, structuring the loans they’re exposed to, and splitting loans across a number of investors (lenders) in order to receive a target rate of return.

Here’s what the industry thinks of the FCA review (Peer2Peer) Rated: A

THE FINANCIAL Conduct Authority released its long-awaited review into the peer-to-peer lending sectoron Friday. Here are some of the industry reactions so far…

Rhydian Lewis, chief executive, RateSetter-“I believe peer-to-peer lending will become a part of every investor’s diversified portfolio and the proposals from the FCA do not change that belief.”

James Meekings, co-founder and UK managing director of Funding Circle-“Funding Circle has consistently campaigned for proportionate regulation that protects consumers, whilst allowing innovation to boost choice and competition in the lending and investment markets.”

Stuart Law, chief executive at Assetz Capital-“While we have just received this latest FCA consultation document, and therefore have not as yet fully digested it, we will always be supportive of any regulation that ultimately benefits our investors, borrowers and the wider peer-to-peer industry. Proposals that advocate greater transparency, appropriate investor remuneration and good corporate governance are very much welcome.”

China

Hong Kong prepares to usher in virtual banks, as 60 firms apply to be pioneers in financial revolution (South China Morning Post) Rated: AAA

When SagaDigits, a HK$2 million (US$254,820) start-up, wanted to add post-merger shareholders and signatories to its corporate bank account, its chief executive approached a Hong Kong bank for help.

What happened next turned into many months of back-and-forth paperwork and arguments with the lender, said the company’s chief executive officer, Arthur Chan. He even spent a month tracking down his bank relationship manager after the staff was relocated to another branch.

Good news may be at hand for him, as the Hong Kong Monetary Authority (HKMA) is poised to issue the city’s first virtual banking licence by year’s end to promote fintech and offer customers “a new kind of experience.”

Ning Tang, founder and chief executive officer of CreditEase, a Chinese wealth-management firm and the majority owner of U.S.-listed peer-to-peer lending platform Yirendai, talks about China’s P2P lending industry. He speaks with Tom Mackenzie on “Bloomberg Daybreak: Asia.”

European Union

What Can FinTech Expect In The Next 24 Months In The Central And Eastern Europe (Forbes) Rated: AAA

Trend #1: Further development of payment and money transfer solutions., FinTech incumbents started historically with niches that were on the one hand abandoned by traditional banks and, on the other hand, not as strictly regulated. That is why there has been more transaction service providers originating in the region, compared to different types of FinTech companies.

Trend #2: Business-to-business. Retail banking requires relatively more effort and brings in lower returns in exchange than servicing Small and Medium Enterprises (SME’s), not to mention large enterprises, which has been one of the remaining strongholds for banks (aside from trading, mortgages and services for corporations). Therefore, FinTech startups began offering their products to individuals but are slowly entering the corporate sector.

One of the examples is

Trend #3: Growth in complexity. From single service providers with excellent client experience, FinTech incumbents have evolved into mature companies with the high tech background.

Trend #4: Blockchain.  

FinLeap moves into the fintech platform-as-a-service space (FinExtra) Rated: A

Berlin-based fintech factory FinLeap is positioning as a provider of bundled solutions for startups and banks, melding stand-alone products across a common platform.

The company is rolling out two platform-based products to connect disparate applications in the consumer markets – FinReach – and in business process management – Infinitec.

10 Irish startups to look out for in 2018 and beyond (EU Startups) Rated: A

This week we took a closer look at the Irish startup scene with the goal to introduce you to some of the most promising startups from there. Below you’ll find 10 Irish startups to look out for in 2018 and beyond.

Flender: Successfully funded through the Seedrs equity crowdfunding platform, Dublin’s Flender is a peer-to-peer (P2P) lending platform for businesses and consumers to borrow and lend money through their existing networks. Flender was launched in early 2017, offering a combination of social network, low-interest rates and an excellent mobile experience. They have so far raised €2 million from investors to formalise the social lending market among friends, family and business connections.

International

Libra Credit Receives Investment from Binance Labs (Crowdfund Insider) Rated: A

Libra Credit, an online lender in the cryptocurrency space, has received an investment from Binance Labs – the tech incubator and VC portion of Binance – one of the largest cryptocurrency exchanges in the world.

According to a post on Medium, the agreement enables BNB holders to receive loans collateralized by the crypto. So Libra Credit will lend fiat and digital assets to users who pledge BNB.

Nexo Crypto Lending Platform Offers to Acquire SALT Lending’s Qualifying Assets (Bitcoin Exchange Guide) Rated: A

Known for being the first-ever instant, cryptocurrency-backed loans provider, Nexo took to Twitter to express its offering to acquire what remains of SALT Lending, a membership-based lending and borrowing network and a worthwhile competitor.

The tweet made on July 27, 2018, made it seem as if the Nexo was doing a favor or “lends a helping hand” to its competition, while sharing its willingness to “provide instant liquidity to its community, up to $2,000,000 per client without “proof-of-access” requirements.” To add to this public announcement, the firm also shared what appears to be its letter of intent to SALT Lending.

Global Debt Registry Bolsters Executive Team To Help Transform Structured Credit Market (Payment Week) Rated: B

Global Debt Registry (“GDR”), today announced two new executive hires from the banking industry. Evan Psaropoulos, formerly of Credit Suisse, has joined GDR as CFO, and Patrick Dietz, formerly of BNY Mellon, has joined the organization as Product Director. This follows Charlie Moore assuming the role of Chief Executive Officer, in addition to President, in recognition of his leadership and vision.

In his role as CFO, Evan will oversee the finance function within GDR, including overseeing equity financing and commercial strategy. He will lead investor relations for GDR across the capital markets space leveraging his investment banking and corporate development experience.

Australia

Online Lender Prospa Receives Recognition as Top Fintech (Crowdfund Insider) Rated: AAA

Prospa, a leading online lender for Australian SMEs, has received a nice recognition being named National Fintech Lender of the Year in the 2018 MFAA Excellence Awards.

The Mortgage & Finance Association of Australia  or “MFAA” is the national body representing finance brokers, mortgage managers, lenders, aggregator/broking groups and other industry participants, in the mortgage and finance industry in Australia.

The MFA also recognised Prospa’s Roberto Sanz as the National Winner of Business Development Manager in the Lender and Support Service Provider category for 2018.

Strong First Half for Fintech Lending (Livewire) Rated: A

It has been a very active half year in the Australian Alternative Finance (AltFi) market. Since my previous wire on the key themes expected for 2018, the market has continued to grow and evolve. The themes were: 1) Continued Growth, 2) Consolidation of Lenders; and 3) Transparency via Listings.

These themes have been present in the first half, however we have seen two other themes present that will accelerate the development of the Australian Fintech lending market. One being the participation of banks in funding the AltFi lenders, the other, Government support for SME lending.

India

i2i Funding Helps Break Away from Traditional Banking (The Tech Panda) Rated: AAA

The Peer to Peer or P2P lending market has doubled in China. Though it might be at a nascent stage in India, according to co-founder of P2P lending platform i2i Funding Raghavendra Pratap Singh, it has a lot of potential. In a chat with The Tech Panda, Singh explained the intricate process and i2i Funding’s plans for the future.

I2i Funding had started with loan amounts of INR 10-15 lakhs per month, and now are doing INR 1.5 crore. Currently, they have around 30,000 registrations for borrowers and around 4000 for investors.  They add around 200-300 new investors per month. So far, the company has disbursed over 500 loans of over INR 8 crores.

How to earn money by investing (Economic Times) Rated: A

Many individuals still consider keeping money in their bank savings accounts akin to investing. Yes, it earns an interest rate but over a longer period of time, the earnings heavily fall short of negating the impact of inflation.

Currently, most banks offer 4 percent or even lower return on their savings accounts. It, therefore, becomes important to look out for other better alternatives and investment options to make your money earn you money.

Asia

Economy in brief: Half of unlicensed P2P lending from China (The Jakarta Press) Rated: AAA

The Financial Services Authority (OJK) has discovered that more than 100 unlicensed peer-to-peer (P2P) lending providers in the country had been developed by Chinese firms.

The OJK reported its findings on Friday, pointing out that out of 227 unlicensed P2P lenders it had listed, at least half originated from China.

What Imran Khan’s Election Win Means For Pakistani Fintech (Forbes) Rated: A

Imran Khan has claimed victory in the 2018 Pakistani election for his PTI party after a campaign that has been marred by violence and allegations of vote rigging. Although Khan’s party is expected to fall short of an overall majority and would have to form a coalition, his economic policies have been questioned.

As per his 

MENA

Thinking outside the (financing) box (CPI) Rated: AAA

Can you describe the development of peer-to-peer lending in MENA?
Marketplace lending is still a relatively new phenomenon in the MENA region. A big part of what we do is to educate investors in the potential for diversifying their existing portfolios with a different type of investment. It offers them a wide-range of choice as investors are able to browse through campaigns and select the ones that match their criteria best.

Liwwa only lends to small and medium enterprises (SMEs), and we continue to scale up that lending activity. As our underwriting activity grew from $2.3 million in 2016 to $5.2 million in 2017, the level of funding from retail investors nearly doubled. Retail lenders want to see a credible company, a solid portfolio and a low default rate. As long as Liwwa continues to deliver on those three criteria, we can build trust in the platform and hopefully build an ongoing relationship with new and existing investors.

Over the last 18 months banks have significantly scaled back lending activity to the SME sector. How as this affected P2P lending activity in the region?
IFRS 9, with its provisioning rules, is one of the main drivers of banks’ reticence to lend to SMEs. The market demand for loans hasn’t appreciably changed, and one could argue that market risk has stabilised in many MENA economies—so the accounting rule change is having an outsized impact. Alternative financing structures such as these are poised to fill a need because much of the debt is treated on an off-balance sheet basis. Retail lenders and non-bank institutions can contribute to filling the SME lending gap given a difference in risk appetites and a more generous perspective on solvency ratios.

Africa

Peer to peer lending: from Nigerians, to Nigerians (Stears Business) Rated: AAA

When societies were small and closed-off, people lent freely among themselves based on trust. At worst, the lender believed that he could take up his case with the local community. But as globalisation and technology came, people began to migrate, and personal lending became inefficient. The solution? Banks.

At the centre of this story is FINT, a Nigerian online peer-to-peer lender founded in early 2017. The idea is simple. Emeka signs up to the FINT platform and requests for a loan. Chinyere signs up, funds her account, and chooses which loan(s) she wants to finance from a pool of anonymous borrowers. In its simplest form, Emeka wants ₦120,000 for six months, and Chinyere lends it to him and gets monthly payments of the principal (₦120,000) and interest (e.g. 10%) every month – or ₦13,200 each month.

FINT has been pioneering this simple form of lending in Nigeria. Its aim to “empower Nigerians by making loans more accessible and affordable; and lending more rewarding” speaks to the core idea of peer-to-peer lending.

Latin America

New rules for credit fintech companies (Lexology) Rated: AAA

The Central Bank also issued Circular 3,898 in May 2018, which set out the procedural rules for establishing such entities.

The Central Bank has introduced these rules in order to continue the modernisation of Brazil’s financial sector – something which has been ongoing since 2013, with more intensive actions being taken since 2016. The main goals of the rules are to:

  • incentivise innovation;
  • increase legal certainty;
  • enable the entrance of new players in the market;
  • increase competition; and
  • reduce interest rates.

Authors:

George Popescu
Allen Taylor

FICO For Microcredit Lending

Scorista

Established in Russia in 2014, Scorista was born out of the need for a reliable risk-scoring model for Russian lenders. Leveraging the skills of famed Russian programmers, Scorista has created the go-to risk management solution for lenders operating in the sub-prime short-term lending segment. How Scorista Began Maria Veikhman, a business management, IT, and risk […]

Scorista

Established in Russia in 2014, Scorista was born out of the need for a reliable risk-scoring model for Russian lenders. Leveraging the skills of famed Russian programmers, Scorista has created the go-to risk management solution for lenders operating in the sub-prime short-term lending segment.

How Scorista Began

Maria Veikhman, a business management, IT, and risk management specialist is the founder and CEO of Scorista. It took off when a few lenders in Russia realized the dearth of reliable risk managers in the market and asked Veikhman to create a risk-scoring model for their lending businesses. Scorista was born as a disruptive innovation to automate the area of credit assessment and provide clients with an instant credit decision. They believe they can help lenders achieve the desired KPIs in a very short span of time with a guarantee of results.

What gave impetus to the company was the dearth of risk management solutions for short-term lenders and payday lenders. They only have access to the FICO score, which is not a very bankable option for payday lenders.

More On Scorista

Scorista offers a broad variety of products ranging from credit assessment to underwriting plans, verification plans, individual scoring, and variable kits, which facilitate scoring and dossiers that legally provide access to complete information about the borrowers. Its prime spot is borrowers looking for less than $5k for less than 12 months. According to Veikhman, Scorista has a 93% forecast accuracy rate. This is much higher than anything available for the segment currently.

This performance has led to profitable growth with offices in China and clients in Russia, China, Kazakhstan, Spain, and Latvia. It has just launched its services in the United States. More than 142 lenders are currently using the Scorista platform, and it is processing over 500,000 applications every month. According to its website, Scorista has helped its partners earn an additional $145 million.

The company has raised an undisclosed amount of funding from Life.SREDA.

Scorista’s Business Model

Scorista’s business model is transactional-based. In Russia, Scorista charges an estimated $1K for every credit decision depending on the volume of applications. Credit lenders are provided with credit decisions instantly so that they can further approve or deny a loan. When the borrower files a loan application with the lender, the lender communicates the borrower file through an API or web interface. Its system receives the application, evaluates the same with its scoring algorithm, and provides a credit decision for approval or denial of the loan. In cases where the scoring algorithm depicts that the borrower can’t repay the loan, Scorista works out different models to predict the amount that the borrower can pay. So if a borrower is rejected for a $2,000 loan for a 3-month period, Scorista will additionally provide that he is a good bet for $1,000 for a 1-month period.

Scorista has developed artificial intelligence and machine learning-powered proprietary algorithms for its scoring systems. It keeps fine tuning its algorithms to ensure optimum performance. It is focusing only on its specialization of short-term micro-borrowers to ensure highest efficiency rates in the segment.

Competitive Advantage

The money-back guarantee is Scorista’s USP. Scorista is ready to refund the fees to its clients if they are not satisfied with its services. Others in the industry are generic players looking to cover the entire market rather than specializing in any one segment. In the name of alternative data, many peers focus exclusively on the social media footprint. However, research shows that decision-making based on social networking is not very reliable as the quality and quantity of information available on borrowers is circumspect. Moreover, about 40% of borrowers do not have extractable social media information available.

Scorista has also introduced Mindscore, a psychometric scoring method that uses a social networking profile and psychometrics to score borrowers. It helps in predicting repayment ability, and the default rate of the applicant.

According to Veikhman, using alternative data in the credit model is dependent on the country. Credit bureaus across Russia have a lot of data on borrowers, and, as such, alternative data is not able to add a lot of weight. But there are no reliable credit bureaus in China so a lot of e-commerce data from Alipay, Wechat, and other social media is put to use. The company is also using mobile data in some cases and incorporates details like the workplace of the borrower to make a credit decision.

The Russian and Chinese branches of Scorista have launched a white label product for mobile applications for lenders. It facilitates fast issuance requiring the borrower to download the application and then submit information to the lender. Scorista performs the function of scoring and the lender can directly issue money through the application, credit card, debit card, or bank account.

Integration

Scorista mainly integrates with short-term lenders and specializes in facilitating short-term loans. Although banks have a broad line of products, Scorista can work with banks that deal in short-term loans apart from full-term loans.

The sub-prime segment that Scorista specializes in is growing across the world. The global economy is not getting better, and many economists agree that it is in the last legs of the growth phase. The last recession was in 2008-09, so considering a cycle of 10 years, we are looking at a recession sooner rather than later. Also exacerbating the trend is the fact that the number of people drawing a lower than average income is increasing in every nation across the world.

Borrowers with low credit scores can improve their credit ratings by following a regular, structured repayment schedule. This will enable them to have access to better loans and banking products with lower rates of interest. Scorista,, with its credit models, helps borrowers gain that access to credit at the right time for the right amount.

Scorista’s Future Goals

Scorista is looking to expand across global markets. It is looking for partners in multiple countries to expand its offering. It is also looking to onboard well-connected financial investors who can help introduce them to their lending networks.

Scorista wants to establish itself as the FICO score for the sub-prime borrower segment. Its key differentiator is its specialization in only short-term microlending and its money back guarantee. The company has been able to build a solid business and is on the precipice of breaking into the big leagues.

Author:

Written by Heena Dhir.

Friday April 6, 2018 Daily News Digest

Friday April 6, 2018 Daily News Digest

News Comments Today’s main news: SoFi to roll out deposit accounts, debit cards next month. PeerStreet raises $29.5M. Welendus loanbook hits 100K GBP in 3 months. Weidai plans $400M IPO. Instamojo to expand into SME lending. Today’s main analysis: Banks slow fintech investment, revert to their own digital infrastructure plans. Today’s thought-provoking articles: Credit bureaus aren’t going anywhere yet. Blockchain […]

Friday April 6, 2018 Daily News Digest

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

SoFi Plans to Start Rolling Out Deposit Accounts Next Month (Bloomberg), Rated: AAA

Social Finance Inc. said it will start offering deposit accounts and debit cards to some customers next month, the first major new product under Chief Executive Officer Anthony Noto.

The San Francisco-based company is looking to branch into various financial services as Goldman Sachs Group Inc. ratchets up pressure on SoFi’s profitable center of personal loans. The startup unveiled a banking-like product, called SoFi Money, in January and began accepting applications to a waiting list.

Majority of Millennial Women Have Money to Invest, But Fear Holds Them Back (Markets Insider), Rated: A

The biggest driver of the investment gap between men and women isn’t knowledge or other financial obligations, but fear, according to a new study by SoFi and professional networking site Levo League (Levo).

However, while millennial women are extremely active in managing their financial status, and over 50%+ have the means to invest each month, the study found the majority of millennial women do not to invest due to fear (56%). Furthermore, the study results indicated the top two reasons why millennial women do not invest is because they don’t know where to start (25%+) and because they are paying down their debt (25%+).

Credit bureaus aren’t going anywhere. For now (American Banker), Rated: AAA

The breach of personal data on more than 143 million customers Equifax revealed in September was followed in mid-March by the news that an executive insider-traded stock before the public was notified about the breach. This week, Equifax acknowledged it had sent erroneous breach notification letters to an undisclosed number of people.

 

 

LendingTree Personal Loan Offers Report – March 2018 (Lending Tree), Rated: AAA

Lenders offered personal loan borrowers less money than they did last month, while offered APRs were mixed. Rate and loan amount offers varied widely among consumers, depending on factors including, but not limited to, credit score, income, and current debt obligations.

Excellent credit (760+ score): Offered APRs to consumers with a credit score of 760+ averaged 7.42% in March.

  • The average best APR offered to all borrowers with credit scores of 760 or above was 7.42%, a decrease of 2 basis points from the prior month, and down 22 basis points from the same period one year ago.
  • At $22,644, the average loan amounts offered with the best APRs to all borrowers with a score of 760 and above was down 4.61% ($1,045) from February, but up over 17.60% ($3,986) from the same period one year ago.
  • The top 10% of offers, presented to borrowers with the best profiles within this group, had offered APRs of 4.87% on average, and loan amounts of $35,669. A borrower with this APR and loan amount would save $3,021 by consolidating debt with a 10% APR over a three-year term.

Good credit (680 – 719 score): Offered APRs to consumers with a credit score between 680 and 719 averaged 15.89% in March.

  • The average best APR for all borrowers with credit scores of 680 – 719 was 15.89%, up 20 basis points from last month and 139 basis points from a year earlier.
  • At $15,993, borrowers with scores of 680 – 719 saw the amounts offered with the best APRs decrease by 175 basis points ($279) in the last month, but increased by 242 basis points ($386) from March 2017.
  • The top 10% of offers, presented to borrowers with the best profiles within the 680 – 719 credit score range, had an average best APR of 7.00%, offered with an average loan amount of $23,822. A borrower with this APR and loan amount would save $3,250 by consolidating debt from a 15% APR over a three-year term.

The most common reasons for seeking a personal loan are credit card refinancing and debt consolidation. These two categories comprise 63% of all loan inquiries.

Source: Lending Tree
Source: Lending Tree

LendingTree Mortgage Offers Report – March 2018 (LendingTree), Rated: AAA

  • March’s best offers for borrowers with the best profiles had an average APR of 4.25% for conforming 30-year fixed purchase loans, up from 4.22% in February. Refinance loan offers were up 11 bps to 4.24%. Mortgage rates vary dependent upon parameters including credit score, loan-to-value, income and property type.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 5 bps to 4.85%. The loan note rate hit the highest since March 2016 at 4.75% and was also up 5 bps from February. We prefer to emphasize the APR as lenders often make changes to other fees in response to changing interest rates.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.72% in March, vs 4.99% for consumers with scores of 680-719. The APR spread of 27 bps between these score ranges was unchanged from February and still near the widest since this data series began in April 2016. The spread represents over $14,000 in additional costs for borrowers with lower credit scores over 30 years for the average purchase loan amount of $238,593. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were up 6 bps to 4.83%. The credit score bracket spread remained at 24 bps, amounting to nearly $13,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $239,668.
  • Average proposed purchase down payments were little changed at $62,758.
Source: Lending Tree

PeerStreet Raises $ 29.5 Million to Further Transform Real Estate Investing (Business Wire), Rated: AAA

PeerStreet today announced the close of a Series B funding round of $29.5 million to continue driving the company’s mission of democratizing access to real estate debt.

The Series B round was led by World Innovation Lab. Existing investors Andreessen Horowitz, Thomvest, Colchis Capital, Felicis Ventures, and others participated along with new investors Solon Mack and Navitas Capital. The raise will accelerate PeerStreet’s growth. Specifically, PeerStreet will be broadening the type of real estate loans it cultivates from its network of lenders and hiring more world-class talent.

RealtyMogul Closes $ 2.75 Million Equity Investment in Plano Multifamily Portfolio (Business Wire), Rated: A

RealtyMogul announced that it has completed an investment in a $11.9 million multifamily apartment portfolio in Plano, Texas, consisting of 156 units.

The property was acquired through a partnership with Comunidad Realty Partners, a dynamic real estate investment firm specializing in multifamily apartment communities in densely-populated Hispanic neighborhoods. Comunidad reports to have owned and managed over $600 million in multifamily assets overall, comprised of approximately 8,200 units. RealtyMogul has invested with Comunidad Realty Partners on five previous transactions.

Stripe launches a new billing tool to tap demand from online businesses (Tech Crunch), Rated: A

Stripe  has made its name by providing developers with a simpler way to start charging customers and handling transactions, but today they hope to take another step by launching a billing product for online businesses. That’ll allow them to handle subscription recurring revenue, as well as invoicing, within the Stripe platform and get everything all in the same place. The goal was to replace a previously hand-built setup, whether using analog methods for invoicing or painstakingly putting together a set of subscription tools, and make that experience as seamless as charging for products on Stripe.

While this is a tool that’s a natural fit for something like Stripe, it’s certainly one that’s created a substantial business opportunity. Last month, Zuora — an enterprise subscription services company — filed to go public amid a fresh wave of enterprise IPOs that included Dropbox and Zscaler (and also, to a certain extent, Salesforce’s big acquisition of Mulesoft). Zuora’s subscription services revenue continues to grow, showing that Stripe will certainly have competition here, but also that there’s a large market opportunity.

Enhancing the Business Value of Loan Pricing Systems (Loan Pricing Pro), Rated: AAA

Today, FinTech companies, marketplace lenders, traditional banking institutions and many other types of innovative new lending platforms are using loan pricing systems to sharpen their focus on balancing shareholder returns with customer pricing sensitivities and market demands.

The lending landscape is changing, but the need to achieve an adequate rate of return while delivering fair and accurate pricing, remains a constant.

Source: LoanPricingPro

Read the white paper in full here.

Five Ways for FinTech Lenders to Achieve ROI on a Loan Pricing System Investment (ProBank), Rated: A

There are a variety of strategies to consider ensuring attaining a reasonable return on your investment in a loan pricing system. We’ll cover each of these in the form of short case studies that we’ve taken from one or more of our existing clients’ actual experiences.

  1. Enhanced Loan Yield Quantitative analysis can be easily used to measure the effectiveness of the loan pricing system implementation on a pre-test / post-test basis. The technique used relies on the same Funds Transfer Pricing (FTP) methodology which a robust loan pricing system uses to calculate loan profitability. To illustrate this, we’ll use a recent client implementation of LoanPricingPRO at a $1 billion lender.
    Source: Probank Report
  2. Increased Collection of Loan Fees In today’s highly competitive environment with historically low rates and generally weak loan demand, loan fees are often sacrificed, or at least underutilized as a tool for increasing profitability. As a general rule, the shorter the loan term, the more powerful the impact of loan fees on loan profitability and ROE.
  3. Decline in Lost Opportunities-Lenders using LoanPricingPRO® usually have a higher batting average when measuring the number of new loan clients against the total number of requests received or applications taken.
  4. Active Portfolio Management-When implementing a loan pricing system with an interface to the organization’s core data systems, significant new reporting capabilities are attained. Lenders are able to receive reports on and track trends in loan officers’ portfolios.
  5. Improved Discipline, Accuracy & Pricing Consistency-As has been shown, it is possible for senior management teams and lenders working
    together and aided by an accurate and appropriately calibrated loan pricing system, to significantly improve the return performance and growth rate of the lending client base.

Read the full report here.

 

A Third of Americans Would Forfeit Their Voting Rights For a 10% Pay Raise, Says Study (Time), Rated: A

More than a third of Americans would give up their right to vote for a 10% annual pay raise, according to a new survey.

The peculiar findings come from a survey conducted by LendEDU, an online student loan marketplace, that polled 1,238 working Americans. In exchange for the hypothetical pay bump, about 35% of these employees said they would sacrifice their voting rights for life. In addition, just over 9% of respondents said they would give up their children’s (or future children’s) right to vote for life for the make-believe raise.

But those aren’t the only big sacrifices the respondents would make for a 10% annual salary increase. More than 12% said they would break up with their partners, and nearly 19% said they would give up their health insurance for the next five years. Forty percent would forfeit their dental care for five years for a raise, and nearly 18% would say goodbye to their Social Security benefits.

Source: Lend EDU

DepositAccounts.com Releases 2018 Top 200 Healthiest Banks and Credit Unions in America (Benzinga), Rated: A

DepositAccounts.com, a subsidiary of LendingTree, today released its list of the 2018 Top 200 Healthiest Banks and Credit Unions in America.

Source: Deposit accounts

If You Can’t Beat Them, Join Them — How Banks, Fintech And Tech Players Can Win Together (Forbes) Rated: A

As tech giants like Amazon, Facebook and WeChat set out on their quest to be all things to all people, eroding the boundaries between industries, banks that want to maintain and grow their market share need to rethink the rules of competition.

While a growing number of banks have acquired fintechs to avoid fading into the background (

12 Best Bank of America Personal Loan Alternatives (Student Loan Hero), Rated: A

Bank of America offers various loans — but not personal loans

Bank of America’s loans, however, are limited to two specific types:

Some online lenders with competitive interest rates on personal loans include:

LendingClub and Prosper, for example, are both in the peer-to-peer lending space. LendingClub has fixed personal loan rates ranging from 5.99% – 35.89%. You’ll need to check your rate with Prosper directly since it varies depending on your credit and borrower profile.

Marlette Funding Welcomes a New Advisor with a Focus on Innovation (LendEDU), Rated: B

Marlette Funding, LLC, recently appointed Marshall Lux as an advisor to its board of directors and company. Marlette Funding is the parent company of Best Egg, which is a lending platform that offers unsecured personal loans.

Jeffrey Meiler, chief executive officer of Marlette Funding, said Lux’s considerable experience in financial services and his expertise in the consumer market make him a good fit for the company.

FinTech Veteran Ethan Schwarzbach Joins inFactor To Head inFactorIQ Platform (PR Newswire), Rated: B

inFactor Corp, an integrated financial technology company providing liquidity solutions across the spectrum of non-bank lending, has announced today that Ethan Schwarzbach has joined the company to head up the company’s new inFactorIQ platform.

Mr. Schwarzbach joins inFactor from Orchard Platform where he most recently served as a Manager on the Business Development team. Orchard Platform is the leading provider of data, technology, and software to the online lending industry.

SOLO FUNDS ALLOWS YOU TO SEAMLESSLY BORROW FROM YOUR PEERS (Black Enterprise), Rated: B

According to a recent statement, SoLo’s founders uniquely understood the plight that American workers were facing every day because they too were once in their shoes. It is not uncommon to seek a small loan from friends and family, but the founders were not seeing a quick and easy lending solution to help facilitate the process.

Traditional banks don’t lend small dollars, and payday lenders charge excessively high interest rates that for many in emergency situations are almost impossible to pay back. There was simply no affordable way to get a small dollar loan. The team thought that the limited resources for small-dollar loans only plagued the minority communities like the ones they were raised in, but that was wrong; they discovered a more mainstream problem. According to the statement, 78% of American workers live paycheck to paycheck and 47% of the country can’t cover a $400 emergency expense without borrowing from someone else or selling a personal asset.

Liquid FSI Adds Key Board Member (deBank), Rated: B

Liquid FSI, a direct lender and creator of the Convert2Pay platform, which provides on-demand payment for medical invoices, added Barry Blecherman to its Board of Advisors.

While a few recent graduates of the NYU Tandon School of Engineering were helping the Liquid FSI team with some algorithms for their technology platform, they mentioned Blecherman, a professor of Finance and Risk Engineering at the Tandon School.

United Kingdom

Welendus loanbook hits £100,000 in just three months (Peer2Peer Finance News), Rated: AAA

WELENDUS investors have funded £100,000 of short-term loans in just three months of its beta stage, the platform has announced.

Nadeem Siam (pictured), founder of the platform, says a full launch of the product is planned soon but Welendus has already built up more than 4,000 users.

Klarna: 53% of retailers say “always on” sales are damaging profits (Tamebay), Rated: A

Research by payments provider Klarna shows that discounting is no longer confined to the traditional winter and summer sales. The new rules of retail mean discounting has become a fluid and unpredictable phenomenon with over half (57%) of consumers expecting regular sales.

The research of 500 British retailers highlighted the negative impact this can have on the bottom line of merchants. Over half of retailers surveyed (53%) say the “always on” nature of sales is having a negative impact on profits – 11% said discounting cost them over £25,000 throughout 2017. This isn’t felt just by smaller retailers, but merchants of all sizes – in fact, it’s those with 100-239 employees that feel the burden most with 66% saying constant discounts are impacting profits.

Investing Show: What you need to know about crowdfunding, peer to peer, and Innovative Finance Isas (This is Money), Rated: A

Stewart Cazier, of alternative lending platform Thincats, details what investors need to know about peer to peer, crowdfunding and Innovative Finance Isas on the Investing Show.

He explains to Simon Lambert, of This is Money, and Richard Hunter, of Interactive Investor, how alternative lending works, what investors need to consider, how to diversify and why it’s important not to consider it risk-free or put all your eggs in one basket.

Five questions for: Samantha Bamert, CEO of AskIf (Money Week), Rated: A

Ask Inclusive Finance (AskIf) is a commercial enterprise with an ambitious social mission – to close the sizeable funding gap for loans to financeable small companies unable to secure funding from banks. Smaller estimates suggest this funding gap could be upwards of £2.2bn per year.

Other research estimates much larger numbers. AskIf is a platform lender bringing together funders, a network of lending partners and the borrowers themselves. By providing support and funding to small companies, we’ll enable job creation, economic value and opportunity in many communities across the UK.

JP Jenkins – Continued New Initiatives (PR Newswire), Rated: B

JP Jenkins reports that its co-owner, Peterhouse Corporate Finance, has closed its 200th capital raise in the past three years, with a total funding of circa £200m for smaller growth companies.

Significant new capital has recently been provided by Malcolm Burne, a substantial shareholder and Executive Director, to expand the JPJ franchise further. The Company has also entered into partnership & collaborative agreements with US Capital Partners, private placements, Equidate a US private companies Stock Market, and Primary Markets an International Unlisted Exchange.

China

Chinese Online Lender Weidai Plans $ 400 Million IPO (Bloomberg), Rated: AAA

Chinese peer-to-peer lender Weidai Hangzhou Financial Information Service Co. is planning an initial public offering that could raise about $400 million, according to people with knowledge of the matter.

There hasn’t been a major listing of a Chinese financial technology company in the U.S. or Hong Kong since LexinFintech Holdings Ltd., which raised $124 million in a downsized U.S. IPO in December, according to data compiled by Bloomberg. Qudian Inc., which completed a $1 billion IPO in October, has since fallen 52 percent from its offer price.

European Union

Insurance and the Open Banking wave: seven use cases (Holland Fintech), Rated: A

Source: Holland Fintech

INNOPAY has defined a first set of use cases for insurance companies. The use cases have been mapped on the most important value levers for insurance to capture relevancy and see where exactly the use cases drive value. The mapping is presented in figure 1 and a first description of the cases is given below.

  1. New (cyber)insurance product for a new client segment: insure TPPs in PSD2 landscape: data sharing through third parties implies new (cyber) risks and thus accountability in case of data breaches.
  2. Better deal engines: PSD2 provides third parties access to payment account information data (AIS). This data can be mined and relevant insights on customer behaviour can be extracted. This behaviour can then be for example spending on insurance to see if a better offer can be made to the customer or looking for patterns which can imply a better risk profile and thus better pricing on insurance products for the customer.
  3. Improve personalised advice: next to mining, the data can be used to improve personalized advice. Although TPPs are by law only allowed to present the account information of customers, insurance companies can use that information to give advice about their financial situation.
  4. Optimise claims management: together with other data sources, account information that is shared by customers’ banks can be used to create new data sets that could be used to improve reconciliation and reimburse the right amount to customers and gain better insights on possible fraud (by looking at for example customer spending patterns).
  5. Up to date customer records: although there is no Open Banking standard yet and all banks are developing their own view and strategy on opening up data beyond PSD2 compliance, there are already good examples insurance companies can build upon.
  6. Expanding service proposition to providing accounts: with the possibility to execute a transaction (PIS) on behalf of the customer or to check available funds (CAF) the functional scope of PSD2 is limited.
  7. Digital identity verification: banks can help in identifying a person during a digital onboarding or digital identity verification process. This functionality is for example already operated by the banks in The Netherlands under the iDIN scheme.

Swiss Crowdlender Banks on Blockchain (Finews), Rated: B

A Swiss crowd-lending platform is using the blockchain technology to improve the way it brokers loans to companies. It will also introduce tokens as a currency of valuation.

Swisspeers, a Winterthur-based platform specialized in loans to small- and medium-sized companies is registering transactions on the Ethereum blockchain. The company is going to use the so-called Smart Contract developed specifically for its purposes, Swisspeers said on Thursday.

International

Not just dumb pipes: Fintech investment slows as banks try to gain back control (Tearsheet), Rated: AAA

Banks’ investment in fintech companies is slowing down as they refocus on improving core banking infrastructure, according to a report by CB Insights.

The Banks in Fintech report, released this week, found that banks have been foregoing big investments and partnerships over the past five quarters with a preference for building products in house — particularly in lending, payments and personal financial management. In both the U.S. and Europe banks spent more of their architecture investment dollars on capital markets software companies than blockchain startups.

Source: CBInsights

KPMG’s Pulse of Fintech report for the fourth quarter of 2017 noted that while deal activity among venture capital and private equity firms remained steady compared to 2016, the earliest stage of VC financing could see fewer deals and a volume decline in particular segments like online lending in the coming year. It’s a sign of the industry’s maturity; banks are showing their efforts to “fight fintech with fintech,” Lindsay Davis, an intelligence analyst at CB Insights, said in a presentation.

Source: Tearsheet

Blockchain Integration Is Leading to a Revolution in Global Trade (The Market Mogul), Rated: AAA

In every step of the trade financing process, blockchain technology seems to offer an efficiency boost in commodity transactions and the global supply chains. From contract generation level, which includes time-consuming reviews of the operation by the Letter of Credit issuing bank, to the settlement level, which often proves problematic due to payment platform incompatibility, fintech offers smart solutions.

Although credit fintech is on the rise, blockchain was mostly used for peer-to-peer lending and that the trade financing gap persists, according to the Asian Development Bank. 70% of financial institutions which responded to the survey claimed that the technology would allow for greater exposure to SME risk, mostly because of significant cost reduction in compliance and due diligence.

Mambu unleashes digital marketplace (Fintech Futures), Rated: A

Software-as-a-Service (SaaS) banking engine provider Mambu has launched its digital marketplace to offer cloud-enabled apps, products and tools for banking and lending.

Mambu Marketplace offers a choice of global and localised solutions which can be integrated with the SaaS engine. Its offerings are based on an API-driven architecture.

Will fintech realize its potential for financial inclusion? (LinkedIn), Rated: A

But it’s increasingly clear that many of the financially underserved are also technologically underserved. The GSMA’s Mobile Economy 2018 reports that nearly 40% of the world’s 5 billion mobile subscribers have no internet access; most of the offline, live in the low- and middle-income countries that could benefit the most from digital financial services. Many mobile subscribers live outside of 3G or 4G signal range, which slows service or limits what they can do with their devices. Many unconnected users must contend with poor network performance, high connectivity and handset costs, poor digital literacy, or a lack of locally relevant content.

Digital lending innovations: Small businesses face a $5 trillion financing gap. Inefficiencies in customer acquisition and analysis prevent lenders from making reliable lending decisions and entrepreneurs from getting the financing that they need. But new technologies and data sources can help small businesses: Mexico’s Konfio analyzes thousands of data points – including biographic information, financial history, electronic invoicing, and social media usage – to make lending decisions quickly and inexpensively.

India

Instamojo plans to expand into SME lending, logistics: CEO Sampad Swain (Livemint), Rated: AAA

Online payment solution provider Instamojo Technologies Pvt. Ltd plans to expand into business loans, logistics and advertising services for small merchants, as more small and medium enterprises (SMEs) turn to digital means to sell and market their product, a top company executive told Mint.

Bengaluru-based Instamojo, which focuses primarily on SMEs, currently has 400,000 SMEs using its payment service, and it is also targeting to onboard at least 1 million SME customers by the end of FY19, the company’s chief executive Sampad Swain said in an interview.

Peer to Peer (P2P) Lending – a Niche in the Financial Ecosystem (PR Newswire), Rated: A

Investment avenues are available either in the form of instruments per se (e.g. equity stocks, bonds, etc.) or as vehicles for participating in the instruments e.g. Mutual Funds, Portfolio Management Services, Alternate Investment Funds, etc. Some of the vehicles are available in small ticket sizes, e.g. Mutual Funds, whereas some require a sizable ticket e.g. PMS (Rs 25 lakh) or AIF (Rs 1 crore). There is a differentiated investment avenue, which is neither a tradable instrument nor a structured vehicle, but a facilitator for retail investors. This is called Peer to Peer (P2P) Lending where there is an online intermediary, which brings the lender and borrower together to facilitate direct lending by the lender to the borrower on mutually agreed terms. This is an online marketplace where the digital platforms like e.g. IndiaMoneyMart would conduct due diligence and credit assessment of the borrower and connect the two individuals.

Asia

Outsmarting the traditional experts with the aid of AI (Asia Asset Management), Rated: A

FinEX Asia offers Asian investors access to US consumer credit assets

Asian institutional investors often find it difficult to gain exposure to US consumer credit assets because of the diverse array of such products and a lack of investment channels.
Canada

Canadian Fintech PayBright Announces  E-Commerce Financing Solution is Now Available on IBM Websphere (Crowdfund Insider), Rated: AAA

Canadian fintech lender PayBright announced on Thursday its e-commerce financing solution is now available for merchants operating the IBM Websphere Commerce platform.

According to PayBright, the e-commerce solution integrates with merchant’s e-commerce platforms and provides Canadian customers with an additional payment option at checkout. Upon selecting PayBright as a payment method, customers can finalize their purchases in a matter of seconds. Merchants then receive their funds directly from PayBright the next business day with no credit risk. Customers then pay for their purchases in affordable monthly installments over time, with interest rates as low as 0%. 

Authors:

George Popescu
Allen Taylor

Alternative Credit Scoring – Financial Salvation For Those With Low or No Credit Score

alternative credit scoring

Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending […]

alternative credit scoring

Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending or banking services because they have no fixed income. The situation creates a question mark on the relevance of traditional credit scoring agencies and their impact over the larger population. Thankfully, fintech innovators are heading towards new, alternative data sources like rent payments, cell phone data, and even social media usage to evaluate credit risk. The aim is to replace traditional credit models with a more complete assessment of a prospective borrower. The focus is to create a win-win situation for both lenders and loan seekers by providing a new foundation to lenders for credit underwriting and providing millions of borrowers a chance to step up on the credit ladder.

The Current Credit Scenario

People with a low or no credit score find it impossible to prove their eligibility for loans. The most disenfranchised are minorities and women. This then creates a vicious circle as they can’t get a loan due to no score, and they can’t improve their score because no one is ready to give them credit.

Currently, the credit score of a person is calculated depending on the information in his credit reports. This information consists of the person’s name, phone number, social security number, employment information, account information, loan repayment details, and credit card accounts.

Alternative Credit Scoring Models

The following alternative credit scoring models have a different approach, leveraging their own data sources, proprietary algorithms, and technology to disrupt existing industry systems. The idea is to reach new audiences and onboard creditworthy borrowers who are lost due to the current model’s shortcomings.

FICO Score XD

FICO (Fair Isaac Corporation) is best positioned to bring the change. Its FICO is synonymous with credit scoring and is usually the most important element in deciding if a person can qualify for a loan.

FICO’s new alternative model, FICO Score XD, developed in partnership with LexisNexis Risk Solutions and Equifax, considers alternative data sources like internet and phone bills to help users who do not have credit data attain a score.

The new scoring system has had a major impact:

  • FICO Score XD 2 was able to score over 26.5 million previously unscorable consumer files
  • 11.8 million were without any credit file and unscorable via any traditional bureau
  • The new system has increased coverage from 91% of applicants to almost 98% of applicants

CreditVision Link

Another scoring model has been developed by credit reporting giant TransUnion in order to integrate alternative data and provide a solution to those who do not have any credit score. It concentrates on “trended data” as compared to only considering historical data in silos. So it not only evaluates the current situation of the borrower but also the credit details for last two years for a more comprehensive credit-scoring model. It has been able to score over 60 million borrowers who were previously unscorable.

Cignifi

Cignifi, based in Cambridge, Massachusetts, is an interesting alternative credit scoring startup. Backed by the Omidyar Network, it provides a platform for providing credit and marketing scores for consumers (especially in the developing world) via mobile phone behavior data. Its big data engine allows the mobile network operators and insurance partners to discover eligible customers for credit cards, loans, insurance, savings, and other banking services.

Cignifi’s main focus is on “financial inclusion,” which uses risk scoring technology to serve the unbanked population who do not have credit scores. It leverages mobile and texting patterns, routine of being at workplace or home, and contact with reputable borrowers.

CreditVidya

This India-based fintech startup offers alternate data-based credit scores for underwriting first-time borrowers using machine learning and big data analytics. It has raised $7 million in funding and uses over 10,000 digital footprints via in-house designed APIs. It has been able to help lenders attract first-time borrowers as well as reduce the processing time from days to 30 minutes.

India alone has 800 million unscored individuals, thus the market size is huge and lenders desperately need a service which can help them tap such a massive segment of the population.

Advantages of Alternative Credit Scoring Models

  • Access to a wider customer base: It enables the widening of the prospective borrower base. This is extremely vital for fintech lenders as it is difficult for them to compete with the big banks on pricing. But their ability to utilize new credit models and give borrowers with “thin” credit files a chance will lead to the expansion of the entire market.
  • Customer experience: Alternative credit scoring also automates the process of credit decisioning and allows for a more hassle-free digitally-enhanced experience. This enhances the utility to millions of borrowers who were otherwise supposed to visit their nearest branches for processing of their loan applications.
  • Improved underwriting process: All the alternative data adds a layer of analytics to the existing data, as well. This gives deep insight to the underwriters and helps in developing an enhanced credit-scoring model.

Conclusion

These alternative credit-scoring models aim to bring banking to the unbanked. This empowers lenders to reach out to individuals who were rejected for the reason that they had no/thin credit flies. The new models will shake up the industry, and lenders incorporating them into their credit underwriting process will see better traction and stronger customer loyalty, especially from those who were earlier denied credit on a faulty premise.

Author:

Written by Heena Dhir.

Tuesday January 9 2018, Daily News Digest

LendingTree purchase APR

News Comments Today’s main news: IEG Holdings wants to turn Lending Club into a balance sheet lender. Groundfloor launches nationwide. Crowd2Fund launches 30M GBP fundraise. China may get a second consumer credit bureau. Klarna expands e-commerce footprint. Today’s main analysis: LendingTree releases mortgage offer report for December. Today’s thought-provoking articles: Are corporations posting fake comments on government regulatory websites? History […]

LendingTree purchase APR

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

News Summary

United States

IEG HOLDINGS (IEGH) LAUNCHES TENDER OFFER FOR UP TO 4.99% OF LENDINGCLUB (LC) (Zacks.com), Rated: AAA

On January 5, 2017, IEG Holdings (OTC:IEGH) launched a tender offer for up to 4.99% of LendingClub (NYSE:LC).
– Management believes it can convert LendingClub from a broker of loans into a balance sheet lender

Groundfloor Expands Historic Qualification Under Regulation A To Launch Nationwide (Business Insider), Rated: AAA

Non-accredited and accredited investors in all 50 states can now participate in real estate crowdfunding investment opportunities with Groundfloor. Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate debt investments via Regulation A that are available to non-accredited investors, today announced that it has received qualification as an issuer under Tier 2 of Regulation A. The qualification allows over 150 million additional investors to access real estate investment opportunities that have been previously unavailable to them, tripling Groundfloor’s addressable market.

In 2017, Groundfloor saw tremendous growth of over 380% in origination volume and 786% in revenue, prior to announcing a partnership with its first institutional investor, Direct Access Capital (DAC).2 Groundfloor lends in 27 states, and has self-originated over $50 million in loans for 398 real estate projects earning individual investor portfolios average annualized returns of 11.74 percent to date. Groundfloor has also raised $9.1M in venture capital from leading fintech VCs and angel investors.

LendingTree Releases Monthly Mortgage Offer Report for December (PR Newswire), Rated: AAA

LendingTree®, the online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

Source: Purchase APR by Credit Score Range (PRNewsfoto/LendingTree)
  • December’s best offers for borrowers with the best profiles had an average APR of 3.80% for conforming 30-year fixed purchase loans, up from 3.75% in November. Refinance loan offers were up 1 bps to 3.70%.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 12 bps to 4.42%, the highest since July 2016. The loan note rate hit the highest since March 2016 at 4.32% and was up 14 bps from November.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.26% in December, vs 4.56% for consumers with scores of 680-719. The APR spread of 30 bps between these score ranges was 3 bps wider than in November and the widest since this data series began in April 2016. The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were up 7 bps to 4.31%. The credit score bracket spread widened to 24 from 20 bps, amounting to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973.
  • Average proposed purchase down payments have been rising for 8 months and reached $63,740.
Source: Purchase Mortgage Offers by Credit Score (PRNewsfoto/LendingTree)

Many Comments Critical of ‘Fiduciary’ Rule Are Fake (WSJ), Rated: AAA

A significant number of fake comments appear among thousands criticizing a proposed federal rule meant to prevent conflicts of interest in retirement advice, according to a Wall Street Journal analysis.

Consider the experience of Robert Schubert, a Devon, Pa., salesperson. A comment posted in his name on the Labor Department website opposed the rule, saying: “I do not need, do not want and object to any federal interference in my retirement planning.”

In an interview, Mr. Schubert said the comment was a fraud. He didn’t post it and doesn’t agree with it. “I am disgusted that people can post comments using my name,” Mr. Schubert said.

Mr. Schubert is among 50 people who responded to a survey last week conducted by research firm Mercury Analytics for The Journal—40%, or 20 of whom said they didn’t post the comment listed under their name, address, phone number and email.

The Journal previously found fraudulent postings under names and email addresses at the Consumer Financial Protection Bureau, Federal Energy Regulatory Commission and Securities and Exchange Commission and the Federal Communications Commission. The Journal’s findings were cited by calls from Congress to delay the repeal of the FCC’s net-neutrality rule.

Corporate Powers Are Stealing Online Identities, Posting Fake Comments to Push for Consumer Law Repeals (Alternet), Rated: A

A pattern of cyber deception is appearing across the federal government in the nooks and crannies of the process where White House directives or Congress’ laws are turned into the rules Americans must abide by—or in the Trump era, are repealed.

Hundreds of thousands of comments, purportedly made by Americans, have come in over the electronic transom to at least five different federal agencies calling for an end to Obama-era consumer protections and other regulations that impede profits, a series of investigative reports by the Wall Street Journal found. Except, the people who supposedly sent these comments never did.

Wrapping up 2017 (PeerIQ), Rated: A

The US economy added 148k jobs in December and the unemployment rate held steady at 4.1%. The jobs number was below economists’ estimates of 190k, but average hourly earnings rose 2.5%, a strong increase, and a metric that market participants are watching as a precursor to higher inflation.

In regulatory news, Indiana is planning legislation that would cap the interest rate on personal loans at 36%, down from the current cap of 391% on payday loans. If passed, this legislation would affect the payday lending industry and some experts have expressed concerns that this may crimp credit availability to the neediest individuals. The US government is also considering updating the credit scoring methodology used in evaluating mortgage applications, to use competitors to FICO score like VantageScore, with the hope that the new scores would expand mortgage credit access to borrowers.

Apollo Global Management and Värde Partners have agreed to acquire a 40.5% stake in OneMain Financial, the non-prime lender spun off by Citigroup after the financial crisis, from Fortress Investment Group.

 

 

Edison Partners makes $ 15M investment in fintech (ROI-NJ), Rated: A

Growth equity investment firm Edison Partners has invested $15 million into MoneyLion, a digital personal finance platform based in New York City.

Student Loan Startup Frank Secures $ 10 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Frank, a New York-based student loan startup, announced this week that it has secured $10 million through its Series A  Funding Round, which was led by Apollo Global Management, with participation from Reach Capital, and Aleph. This funding round brought its total funding amount to $15.5 million.

Digital financial advice startup SuperEd raises $ 5 million from key investors and staff (Smart Company), Rated: A

Digital superannuation advice startup SuperEd has completed a $5 million capital raise from both external investors and staff members to ramp up its expansion, with the 2012-founded company betting on digital advice being a big deal for fund managers going forward.

Credit Karma Teams with American Express to Offer Advance Tax Refund (Finovate), Rated: A

Earlybird Advance is a no-fee, no-interest loan from MetaBank that allows users who file through Credit Karma to claim from $500 to $1,000 of their tax refund as soon as 24 hours after the IRS accepts their tax return. This is a step up from the three-to-four week time period it generally takes for taxpayers to receive their funds.

Testimonial Tree Partners With J4 Mortgage Solutions to Offer Online Review Software to Mortgage Lenders and Title Companies (PR Newswire), Rated: B

Testimonial Tree announces its new alliance with J4 Mortgage Solutions, LLC, a mortgage technology consulting firm, to add online reviews and automated feedback to its suite of tech services.

The Future Of Financial Advice Requires AI With A Human Touch (FA-Magazine), Rated: A

“Digital leaders report an 8.6 percent increase in revenue, an 11.3 percent rise in productivity, and a 6.3 percent improvement in market share. Advanced firms now generate 32 percent of their revenue through digital channels, and expect that amount to rise to 48 percent by 2022,” the study pointed out.

Digital leaders acknowledge what will be the growing importance of AI in the digital transformation of industry from the front office to the back office over the next five years. According to the study, while more than half of the digital leaders are already using AI to increase productivity, some 40 percent are extending AI applications to investment management as well.

Community Reinvestment Fund, USA and U.S. Bank Partner to Expand Access to Credit for Small Businesses (BusinessWire), Rated: A

Community Reinvestment Fund, USA (CRF) – a mission-driven non-profit lender dedicated to improving communities and transforming lives – announced today that it has partnered with U.S. Bank to deliver a new solution for connecting small business borrowers with responsible lending options from community-based lenders across the country.

There are approximately 28.8 million small businesses in the U.S., accounting for more than 63 percent of the net new jobs created between 1993 and 2013. However, the Federal Reserve Bank’s 2016 Small Business Credit Surveyfound the most common challenge facing small businesses was “credit availability or securing funds for expansion.”

Predicting Comptroller Otting’s Impact on Fintech (Lend360), Rated: A

Second, Comptroller Otting may be helpful to Fintech companies in addressing important issues such as the Second Circuit’s decision in Madden v. Midland Funding and the so-called “true lender” issue.  For example, the OCC could adopt a rule or issue interpretative guidance: (1) providing that loans funded by a bank in its own name as creditor are fully subject to Section 85 and other provisions of the National Bank Act for their entire term; and (2) emphasizing that banks that make loans are expected to manage and supervise the lending process in accordance with OCC guidance and will be subject to regulatory consequences if and to the extent that loan programs are unsafe or unsound or fail to comply with applicable law.  (The rule should apply in the same way to federal savings banks and their governing statute, the Home Owners’ Loan Act.)  In other words, it is the origination of the loan by a supervised bank (and the attendant legal consequences if the loans are improperly originated), and not whether the bank retains the predominant economic interest in the loan, that should govern the regulatory treatment of the loan under federal law.

 

Consider Alternative Funds to Hedge Against a Market Downturn (NASDAQ), Rated: A

To ease your anxiety, you might consider adding a small dose of alternative investments–things that zig when the stock market zags–to your portfolio, even if it means giving up some potential returns.

Wells Fargo Investment Institute, the research and strategy arm of the giant bank, recommends a 23% allotment to various alternative investments for moderate-risk investors, for example, up from 16% two years ago. At Altfest Personal Wealth Management, in New York, 15% of client assets are invested in alternatives, up from 10% last year.

Market-neutral funds. If your goal is to invest in an asset that doesn’t move in sync with the S&P 500, consider a market-neutral fund, such as a merger-arbitrage fund.

Options-based funds allow you to maintain your stock exposure–or even put new money in the market–with some degree of safety.

Long-short stock funds. These funds bet on some stocks and against others with the goal of delivering respectable returns with low volatility. The funds have been 15% to 25% less volatile than an S&P 500-stock index fund over the past decade.

CLSA Top Three Books For 2018 (ValueWalk), Rated: A

What do an undocumented immigrant in the South Bronx, a high-net-worth entrepreneur, and a twenty-something graduate student have in common? All three are victims of our dysfunctional mainstream bank and credit system. Today nearly half of all Americans live from paycheck to paycheck, and income volatility has doubled over the past thirty years. Banks, with their high monthly fees and overdraft charges, are gouging their low- and middle-income customers, while serving only the wealthiest Americans.

“The Unbanking of America”

Why I Joined MetaProp As An EIR (LinkedIn), Rated: A

I recently left RealtyShares, the online marketplace for real estate investing, as CEO after founding the company in my living room back in 2013.

When Zach realized I was leaving the CEO role at RealtyShares, he reached out and asked if I wanted to get involved with MetaProp, the first real estate technology incubator based out of NYC.

This opportunity would give me a chance to pursue my passion in real estate technology through a different lens while mentoring startup founders and CEOs and helping them as they embark on the same journey I embarked on four years ago.

AlphaFlow Appoints Chris Woida As Co-Chief Investment Officer (AlphaFlow), Rated: A

AlphaFlow, the first automated alternative investment platform for real estate, announced today that Chris Woida has joined the company as co-Chief Investment Officer. Woida will serve as co-CIO alongside the firm’s CEO Ray Sturm, who will act as both CEO and co-CIO.

Woida brings over 10 years of experience in the financial services industry, previously helping build BlackRock’s smart beta and factor-based platforms and serving as the lead investment strategist for its flagship style-factor hedge fund during his seven years with the company. Most recently, he served as Managing Director, Head of Index Solutions at Axioma, a provider of enterprise market risk and portfolio analytics solutions. In this role, Woida helped the index business expand into derivatives, fixed income and alternative data sources, including AI and ESG.

MPOWER Financing Hires Lutz Braum, Fintech and Higher Ed Marketing Veteran (Cleveland19), Rated: B

MPOWER Financing, a public benefit corporation focused on removing financial barriers to higher education in the U.S., has appointed Lutz Braum as its vice president of marketing and business development.

Finova Financial’s New Fundraising Process Leverages Cryptocurrency to Serve Non-Accredited Investors (Finovate), Rated: B

Alternative lender Finova Financial introduced a new product this week that will offer non-accredited investors access to regulated public securities offerings.

The new offering is called the JOBS Crypto Offering (JCO) and will allow investors to use cryptocurrency to invest in equity ownership of previously privately-held companies.

Read more about Finova’s JCO offering here.

Is it possible to land a car loan with no down payment? (Bankrate), Rated: B

Buying a car is a significant investment, with the average new car costing $34,968 in 2017.

The average down payment for a used car is generally 10 percent of the purchase price; if you’re buying a new car, you can expect to pay slightly more, probably between 12 and 20 percent.

LENDINGTREE, LEADSCON ANNOUNCE $ 25,000 INNOVATION CHALLENGE IN LAS VEGAS (Business Insider), Rated: B

LendingTree®, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top innovations in financial technology (fintech) lead generation at LeadsCon Las Vegas this March.

Startups and established businesses from around the world can apply today for a chance to receive exposure, bragging rights and $25,000 in cash.

United Kingdom

IFISA first-mover Crowd2Fund kicks off £30m fundraise, eyes £1bn valuation by 2022 (AltFi), Rated: AAA

Crowd2Fund has embarked on an ambitious series of fundraises that it hopes will see £30m raised within the next 24 months.

The peer-to-peer lender, one of the first to launch an Innovative Finance ISA, has already raised £1.5m from 113 of its own investors (all of whom are either sophisticated or high net worth individuals). More shares were made available after demand exceeded the initial target of £1m. These investors have bought shares in the company at a valuation of £33m. The capital is being raised through Crowd2Fund’s platform.

UK consumer lending not driven by subprime borrowers, regulators say (Daily Mail), Rated: A

Rapid growth in Britain’s consumer credit has been driven by borrowing by people with good credit scores, not subprime lending, according to research from regulators on Monday.

Unsecured consumer lending grew at near double-digit rates in 2016 and 2017, and concern that lenders had overestimated their borrowers’ creditworthiness led the Bank of England to tell them in September to hold 10 billion pounds ($13.54 billion) of extra capital.

However, research jointly published by Britain’s Financial Conduct Authority and a BoE blog showed that two-thirds of outstanding lending as of November 2016 was held by borrowers with credit scores in the top 30 percent.

Here’s everything you need to know about business finance (UKTech.news), Rated: A

Wherever you are on your life cycle, knowing the financing options available to you is a crucial part of growing and running your business.

Equity Funding

Equity finance can be used at various stages of your business life cycle and giving up equity can be a big decision.

Private equity

Private equity focuses on more medium to long term investment and will usually involve the development of the product and a new management structure to improve the performance of the business.

Crowdfunding

Crowdfunding aims to connect businesses with a large number of potential investors via a shared online platform.

Debt Funding

Debt finance is usually used as a means of long term investment or funding working capital.

Peer to Peer (P2P) lending

P2P lending brings individual borrowers and lenders together via an online platform by by-passing traditional banks with the aim of achieving better rates for all.

Asset finance

Assets can be purchased via leasing or hire purchase agreements which can assist the cash flow of the business. The asset is not fully paid for upfront but over a fixed period of time and the lease or hire purchase agreement is secured on the asset being financed.

Debt factoring

A debt factor will take on the sales ledger of the business and chase money owed by your customers. The factor will advance most of the value of the outstanding sales invoices to the business with the balance being paid once the customers have fully repaid their debt.

China

China Fintech: 2nd consumer credit bureau in sight now (EJ Insight), Rated: AAA

Last week, on January 4, the People’s Bank of China (PBoC) accepted a license application for consumer credit bureau led by the National Internet Finance Association of China. As of now, the Credit Reference Center of the central bank is the only consumer credit bureau in China.

Consumer loan securitization boom put on hold as China clamps down on leverage (Reuters), Rated: A

A boom in asset-backed securities issued by micro-lenders aiming to expand in China’s fast-growing online credit market looks set to slow this year amid growing regulatory scrutiny.

Rules announced on Dec. 1 limited the amount of lending backed by the products the companies can make. They were also required to consolidate them on their balance sheets.

Ant Financial is the largest issuer of consumer loan securities, accounting for 60 percent of all issues in 2017, according to Reuters calculations based on data from China Securitisation Analytics.

Its two Chongqing-based micro-loan companies had total net capital of 10.6 billion yuan, but issued 265.1 billion yuan in loans by the end of June, according to CIB Research, a unit of Industrial Bank Co (601166.SS). Outstanding loan securities issued by the two units have exceeded 250 billion yuan, it said.

Growth in China’s financial technology has only just begun, CEO says (CNBC), Rated: A

China’s burgeoning financial technology industry went through plenty of ups and downs last year, but growing pains experienced in the sector aren’t fazing one local player.

But increased competition in the space doesn’t suggest the sector is overcrowded, according to David Ye, the co-founder and CEO of Jianpu Technology.

“In China, we have close to 9,000 microfinance companies, we have close to 2,000 peer-to-peer companies. Only four of them got listed … It’s just a tiny drop of water in the big blue ocean,” he said.

This firm’s fintech play is connecting financial services in China from CNBC.

European Union

Klarna Payments Expands eCommerce Footprint with ACI Worldwide (BusinessWire), Rated: AAA

ACI Worldwide (NASDAQ: ACIW), a global provider of real-time electronic payment and banking solutions, today announced an extended partnership with Klarna, leveraging ACI’s UP eCommerce Payments solution. This will enable online businesses in 10 major markets, including the U.S. and U.K., to easily integrate Klarna’s payment products, and offer shoppers a fast and frictionless checkout process that can improve conversion rates immediately.

International

History of Ripple (BuyRipple.com), Rated: AAA

Source: BuyRipple.com

Cryptocurrency markets: Top 10 coins with greatest 24-hour change 8 Jan 2018 (finder), Rated: A

3. ETHLend (LEND) +32%

The peer to peer lending platform has seen a decent spike after it featured heavily across exchange Coinspot’s Facebook page as they look too soon be listed on the exchange. That exposure has also highlighted the achievements the Estonian company has made recently, including launching its fiat based loans at the end of 2017.

Crypto cards just suffered a major setback (Financial Times), Rated: A

Strict terms and conditions usually govern the circumstances in which prepay cards can be issued by unlicensed (non-bank) institutions due to their popularity with the unbanked or low-credit community as well as their propensity to be taken advantage of for money laundering reasons. These T&Cs tend to be jurisdiction dependent, and can in some cases restrict the types of funds that can be loaded onto cards by source (for example the source of funds might be restricted to welfare payments and/or employer compensation for services rendered).

Take as an example the following condition attached to a card brought to market by an outfit called TenX:

LOADING FUNDS TO YOUR ACCOUNT

Five.1 Your Card is a payout card tied to an account directly or indirectly established by an employer or other such corporate payor (each, a “Payor”) on behalf of a consumer to which electronic funds transfers of the consumer’s wages or other compensation are made on a recurring basis, whether the account is operated or managed by the employer, a third party payout processor, or a depository institution. Only funds from a Payor may be loaded to your Account In case of errors or questions about the funds loaded to your Account, contact your payout provider.

How will lenders meet identity verification challenges in 2018? (Bankless Times), Rated: A

Online lenders will start to move away from the social security number (SSN) as a personal identifier.

Big data and machine learning will take centre stage in the drive for better identity verification.

Larger online lenders will bring more of their fraud-fighting efforts in-house.

Online financial institutions will begin to adopt blockchain.

Cybersecurity startups raked in $ 7.6 billion in VC money in 2017 — twice as much as the year before (Business Insider), Rated: B

Globally, venture investors put $7.6 billion in cybersecurity companies last year, which was up from $3.8 billion in 2016, according to the research firm. The number of cybersecurity-related investments jumped to 548 in 2017 from 467 deals the year before.

Global spending on cybersecurity was estimated to reach $83.5 billion in 2017, and that number could hit $119.9 billion in 2021, according to an IDC report from October.

India

FinTech Trends That Will Shape The Industry In 2018 (BW Disrupt), Rated: A

Banks will increasingly start looking at startups in the FinTech, RegTech and InsurTech space as their extended innovation arms with a view to collaborate with them.

The BharatQR code, a unique interoperable payment acceptance solution developed by the NPCI (National Payments Corporation of India), Mastercard and Visa will enable point of sale (POS) transactions to be made more seamlessly. Along with banks, payment wallets like Paytm and MobiKwik will continue to make huge investments to leverage this new standard.

Startups in this space are likely to well as adoption by banks and other financial institutions rises in AI, ML, NLP (Natural Language Processing) and NLG (Natural Language Generation).

Asia

How one woman beat the odds to start-up success (Myanmar Times), Rated: AAA

In credit-scarce Myanmar, obstacles abound for budding entrepreneurs with bright ideas, big potential and dry pockets. With banks reluctant to lend to individuals without appropriate collateral and proven track records, many small businesses ultimately fail.

Ma Khin Yadana is among those with a success story behind her garment business, which she started from scratch around five years ago.

To get back on her feet, Ma Khin Yadana sought help from a small business group on Facebook, where she met with other garment shop owners across Myanmar who were willing to invest in start-up businesses like hers by extending credit via a peer-to-peer (P2P) lending system. In return, the funds would be paid back with interest within 15 days.

However, the constant pressure of having to repay loans has begun to take a toll on the young entrepreneur. “Most of the loans from investors are on six-month terms. So far, I have 70 investors to whom I must repay K100 million in total.

When the loans are due, I have to repay in full plus interest. The main problem is the 15pc interest rate, which is too high,” she said.

In mid-2017, with higher levels of debt coming due, Ma Khin Yadana negotiated with investors for lower interest rates of 10pc.

Canada

CIBC Innovation Banking unit launched to help grow startups (Finextra), Rated: A

Today, CIBC (TSX: CM) (NYSE: CM) introduced CIBC Innovation Banking, a full-service business that delivers strategic advice and funding to North American technology and innovation clients at each stage of their business cycle, from start up to IPO and beyond.

Authors:

George Popescu
Allen Taylor

Lending Times Survey Results

digital lending services

Lending-Times recently conducted a survey of our readers to find out more about the types of lending services they offer and how they relate to their customers. The following are the results of the survey. What type of lending services do you provide? (select all that apply) The majority of readers (55.88%) are in the […]

digital lending services

Lending-Times recently conducted a survey of our readers to find out more about the types of lending services they offer and how they relate to their customers. The following are the results of the survey.

What type of lending services do you provide? (select all that apply)

The majority of readers (55.88%) are in the consumer loan business followed by 36.76% involved in business lending. 17.65% are in mortgage lending while 16.18% are in student lending 10.29% are involved in auto lending. Another 25% identify as alternative lenders, a broad category of lending that includes many types of non-bank loans. Because readers could choose more than one category for this question, the survey results do not add up to 100%.

What is your role within the organization?

The largest percentage of survey takers (25%) fall into the digital sales, marketing, and acquisition category. 11.76% fall into risk, fraud, and compliance occupations, and another 10.29% consider themselves a part of product and technology. The majority, 52.94%, chose “other.”

How do you verify the identity of your borrowers?

When it comes to identifying borrower identities, 37.31% said they do so through data bureau checks. Digital identity verification checks are used by 32.84% of those who took our survey, and 23.88% said they verify borrower identities with a manual review of identity documents. Only 5.97% said “other.”

How do you collect supporting documents for underwriting (for example, utility bills for proof of address, W2s for proof of income, etc.)?

Regarding underwriting practices, 69.74% of survey takers said they collect documents through electronic capture and upload, 25% by email, and 5.26% have borrowers deliver to a physical location. No respondents said they receive documents by fax.

Do you think your current process for onboarding new applicants could be improved?

A simple yes or no response on this question revealed that 93.24% of survey takers believe their new applicant onboarding processes can be improved while only 6.58% responded in the negative.

What stage of the digital transformation journey is your organization at today?

Almost half, 42.11%, of survey respondents said they are a fully digital organization, and the same percentage said they are on track to becoming a fully digital lender. Those just starting out represent 19.74% of our readership who said they are working on a full-digital strategy and evaluating vendors. None of the respondents said they have no plans to become a fully digital lender.

What do you think are the main barriers to offering fully digital lending services? (select all that apply)?

The majority of survey takers (53.42%) said the biggest barrier to offering fully digital lending service is mitigating risk while avoid loan application abondonment. Another 52.05% said meeting compliance without compromising the user experience is the main barrier. Almost one-third of survey takeres (27.40%) said they lack the skills, resources, and budget to offer fully digital lending services. Respondents who said they do not see the value of shifting their loan origination practices to digital channels registered at 9.59%, and those unsure of where to begin came in at 5.48%.

Rank on a scale from 1-5, the value of each benefit in the digital lending process (1 being very valuable, 5 being not valuable).

Our readers seem to value regulatory compliance more than any other digital lending benefit. Risk mitigation followed closely behind followed by improvements in operational efficiency. Cycle time and user experience pulled up the rear.

Do you feel your lending user experience is a competitive differentiator?

84% of survey takers said the user experience on their lending platforms are a key competitive differentiator while 16% said it wasn’t.

If you already offer digital loans, which of the following options do you provide?

Among survey takers, the digital lending options provided the most include desktop/laptop (52.11%), mobile-optimized website (50.70%), and native app (15.49%). Over one-third (39.44%) said they offer all three options.

Authors:

Allen Taylor

Thursday October 19 2017, Daily News Digest

China p2p lenders

News Comments Today’s main news: Affirm wants to offer financial advice. RateSetter to launch IFISA. SoFi announces Entrepreneur Program 2.0. Prosper tightens guidance on consumer loan ABS. Qudian priced IPO above range. IBM partners with 8 banks on blockchain trade platform. GuiaBolso raises $39M in Brazil. Today’s main analysis: U.S. banks get aggressive on growth. Party on, Chinese consumers. Today’s thought-provoking articles: […]

China p2p lenders

News Comments

United States

United Kingdom

China

International

India

Asia

MENA

Latin America

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News Summary

United States

Affirm Wants To Move Beyond Simple Lending to Provide Financial Advice (WSJ), Rated: AAA

Online financial services company Affirm Inc. wants to move beyond simple lending to provide financial advice to customers, its founder and chief executive said Wednesday.

Additional services Affirm wants to provide would include helping some consumers “get over this hump” of too much debt.

SoFi Announces Entrepreneur Program 2.0 (Crowdfund Insider), Rated: AAA

Online lending platform SoFi recently announced the launch of its Entrepreneur Program 2.0. The company reported that original program was launched four years ago and since then has helped four classes of 70 companies founded by the lender’s members to get off the ground with its coaching and resources.

SoFi then revealed some improvements, which would benefit the future classes.

  • More Eligibility: The program is now open to all members working as a founder or co-founder either full or part-time on an innovative and scalable tech-enabled business.
  • SoFi Offers Investment: The lender will give equity capital to each of the members of the Class. For this coming Class, this amount will be $25,000 per company.
  • New Curriculum.
  • Alumni engagement:
  • Community engagement: SoFi will engage our 380,000-plus members in the accelerator process and share the incredible companies their fellow members are working on.
  • Dedicated resources:

Prosper tightens guidance on consumer loan ABS (IFRE.com), Rated: AAA

Online lender Prosper Marketplace pulled in guidance on its US$501.05m consumer loan ABS on Wednesday, with all three of the deal’s tranches heard to be at least twice covered.

Guidance was announced at 85bp area over EDSF on the largest 0.85-year A-/A tranche (Fitch/Kroll) and 165bp-175bp over iSwaps for the US$77m 2.14-year BBB-/BBB tranche.

Guidance on the 2.89-year Class C, unrated by Fitch and rated B+ by Kroll, is 340bp area over iSwaps.

Those levels were tightened from whispers circulated at 85bp-95bp over EDSF, 180bp-190bp over iSwaps and mid-300bp over iSwaps, respectively.

US banks abandon crisis-era taboo of growth (Financial Times), Rated: AAA

“I’m happy to say our focus has shifted beyond the implementation of regulations . . . to growth,” said Mr Chavez.

No other big US bank put it that bluntly, but the sentiment seemed to be shared. With the notable exception of Wells Fargo, still trying to shake off the damage of its fake-account scandal, executives were making encouraging noises about new businesses and top-line expansion as they presented third-quarter results.

At Citigroup, for example, which shed about $500bn of assets in the years after the crisis, CFO John Gerspach talked about growth in credit cards in Mexico and wealth management in Asia. At Bank of America, which added about $90bn of assets over the year, CFO Paul D’Onofrio said he welcomed any “refinement” to rules that “allows us more access and control over our capital [and] liquidity in support of responsible growth”.

Source: Financial Times

At Morgan Stanley, James Gorman said the bank “won’t be shy” about doing deals such as last month’s acquisition of Mesa West Capital, a commercial real estate platform — prompting one analyst to remark on the chief executive’s “more aggressive” tone.

“We’re not looking for any grand splash here, but we’re open for business opportunistically,” said Mr Gorman.

Source: Financial Times

Now the mood has changed in Washington. Few laws have been ripped up, as yet, despite Donald Trump’s early pledge to “do a number” on Dodd-Frank. But new figures in agencies such as Randy Quarles, appointed this month to the most powerful bank regulatory job in the country, should make a real difference. Trade groups say they are expecting him to take a looser grip on the banks than Daniel Tarullo, the previous supervisor-in-chief at the Federal Reserve.

Banks Need Next-Generation KYC to Confront Today’s Digital Identity Crisis (Dealbreaker), Rated: AAA

Cybercrime has evolved to exploit gaps in enterprise data security and disrupted identity theft in the process. It has spawned a parallel black market on the Dark Web, where criminals transact in bitcoin to anonymously trade stolen data, minting hundreds of billions in annual and often untraceable proceeds for sellers[1].

Javelin Strategy & Research’s 2017 Identity Fraud Study said ID theft hit a record high in 2016, victimizing 15.4 million people, or roughly two-million more victims than the previous year[2]. ID theft is generally a precursor to credit card fraud, which attributed to worldwide losses of $21.84 billion in 2016[3].

Card issuers incurred 72%, of those losses last year, with card fraud expected to syphon a grand total of $88.87 billion out of the global financial system over the next four years.

Understanding the vast supply-and-demand mechanism of the Dark Web economy is integral to KYC strategy for banks. The Center for Strategic and International Studies pegs the worldwide cost of cybercrime at $445 billion a year[5]. According to the 2016 Cost of Cybercrime Study, data breaches, cyber-fraud and related disruptions impact U.S. organizations the hardest, with the average cyberattack generating $17.36 million in costs. Of the 4149 data breaches and 4.2 billion records exposed in 2016[6], as reported by cybersecurity firm RiskBased Security, the U.S. comprised 47.5% and 68.2% of those numbers, respectively.

Feedzai closes $ 50M Series C to help banks and merchants identify fraud with AI (TechCrunch), Rated: A

Feedzai is announcing a $50 million Series C this morning led by an unnamed VC with additional capital from Sapphire Ventures. The six year old startup builds machine learning tools to help banks and merchants spot payment fraud.

With 60 clients including major financial institutions like Capital One and Citi, Feedzai remains optimistic that allowing savvy customers to build on top of its service is the key to longevity.

Affirm CEO: Credit Security Is Centuries Behind (WSJ), Rated: A

Women who own businesses find bank loans harder to get (Fox Business), Rated: A

A survey of businesses conducted this summer and released Wednesday found that 30 percent of companies owned by women were able to get bank loans during the previous three months, compared to half of all the owners surveyed.

Only 21 percent of the women surveyed said they expected it will be easy to raise debt financing — essentially loans — in the next six months, compared to 44 percent of all companies. Fewer of those owners said they were likely to pursue a bank loan, at 67 percent compared to 75 percent of all owners.

The number of U.S. businesses owned by women grew nearly 27 percent from 2007 to 2012, rising to nearly 10 million from 7.8 million, according to the most recent Census Bureau figures. The total number of businesses grew less than 2 percent.

Bank of America found this year that 11 percent of owners who are women applied for loans the past two years versus 13 percent of owners who are men. Some banks have realized they need to be more aggressive in lending to businesses owned by women; Wells Fargo set a goal of $55 billion in loans by 2020, but surpassed that number in 2013, spokesman Jim Seitz says.

iCapital and CAIA Partner On Alternative Investment Education Initiative (FIN Alternatives), Rated: A

Financial technology platform iCapital Network has partnered with the Chartered Alternative Investment Analyst (CAIA) Association on a sweeping education initiative aimed at increasing knowledge about alternative investing.

As part of the new initiative, iCapital will offer CAIA’s Fundamentals of Alternative Investments program to its member network of more than 1,900 registered investment advisors, broker-dealers, private banks and family offices.

Harvard Partners LLC Announces Investment Interests in Commercial Finance (Lessors), Rated: A

Harvard Partners CEO Bill Verhelle announced his firm is seeking to invest in, or purchase, small innovative U.S.-based commercial finance firms. Interest is not limited to companies already in the equipment leasing and finance industry, though he will be at that industry’s annual convention next week.

Harvard Partners is specifically interested in companies with demonstrated experience and capable management teams employing new business models. Harvard Partners’ first equity investment this year, along with another private equity investor, involved a West Coast business lending and equipment finance firm with advanced financial technology (fintech) capabilities.

Top of the Morning (Axios), Rated: B

Another sovereign wealth fund is opening shop in Silicon Valley. This time it’s Abu Dhabi-based Mubadala Investment Co., which also is launching a $400 million direct VC fund (in partnership with SoftBank) and a $200 million VC fund-of-funds.

  • “It’s more than just setting up an office — it’s a real committed and genuine intent to be an active member of this community,” Mubadala’s Ibrahim Ajami tells Axios’ Kia Kokalitcheva, who scooped the news.
  • He adds that the direct fund shouldn’t compete with SoftBank Vision Fund, into which Mubadala has pumped $15 billion, given that it will be looking at earlier-stage deals. Get the full story.

REALTYSHARES REVIEW: AN EASY WAY TO START INVESTING IN REAL ESTATE (The College Investor), Rated: B

Real estate crowdfunding is one of the fastest growing trends in the investment community. They provide obvious value to investors who would otherwise be priced out of commercial and private equity deals. RealtyShares is one of these crowdfunding platforms, but they have a unique niche.

They work with both institutional investors and “the crowd” of smaller investors to find a wide range of projects.

To invest in RealtyShares, you need to be an accredited investor.

What Types Of Investments Does RealtyShares Offer?

  • First position liens
  • Preferred Equity
  • Mezzanine Debt (aka Bridge Loan)
  • JV (Joint Venture) Equity

Your minimum investment is $5000, and you’ll pay a 1% investment fee on equity investments, and up to a 2% interest rate spread on debt.

Private Lending Association Partners With Deal-Flow Company (Broadway World), Rated: B

American Association of Private Lenders (AAPL) has partnered with Private Money Lending Guide (PMLG). The partnership brings together an association that provides education, ethics and networking opportunities for private money lenders and a tool for deal-flow that enables borrowers and lenders to find the appropriate counterpart for their deals.

Ken Rees, CEO of Elevate, to Speak at Money 20/20 Conference (BusinessWire), Rated: B

Ken Rees, Chief Executive Officer at Elevate, a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, will speak on a panel at the Money 20/20 conference in Las Vegas on October 24, 2017. The panel will focus on the future of alternative lending, including fintech’s potential to partner with banks to create better outcomes for both parties. The panel will also tackle the challenges that alternative lenders face now, and how to use innovation and creative solutions to address them.

SESSION: Reinventing Consumer Lending: More Access, New Models & Overcoming Big Challenges

WHEN: Tuesday, October 24, 2017 at 3:10-4:00pm PT

WHERE: San Polo, The Venetian Level 3 – The Venetian Las Vegas, 3355 S Las Vegas Blvd, Las Vegas, NV 89109

United Kingdom

RateSetter plans to launch IFISA this tax year (P2P Finance News), Rated: AAA

RATESETTER has said it plans to apply to HMRC for ISA manager status and launch its Innovative Finance ISA (IFISA) before the end of the current tax year.

RateSetter said on Wednesday that it will keep lenders updated via its website but also gave people the option to sign up to its IFISA mailing list.

FCA identifies low P2P usage but fewer signs of consumer vulnerability (P2P Finance News), Rated: A

JUST 1.4 per cent of the adult population are using peer-to-peer lending or crowdfunding but the product has among the proportionally lowest levels of financially vulnerable customers, figures from the Financial Conduct Authority (FCA) suggest.

The data is revealed in the City watchdog’s financial lives survey, a poll of almost 13,000 consumers about the products they hold and their experiences of them.

The research shows just 180 out of 12,865 adults, or 1.4 per cent, surveyed said they have used a crowdfunding or P2P product, which the FCA says works out as 700,000 adults when weighted against the UK population.

Of those who are using P2P, 74 per cent of respondents identified themselves as male and 25 per cent said they were female.

Wellesley & Co: Get ready for proptech 3.0 with “elite survivors” (P2P Finance News), Rated: A

WELLESLEY & Co has cited predictions that there will be consolidation in the proptech sector, as firms drop by the wayside leaving “a crop of elite survivors”.

The alternative property lender said it expects the rest of 2017 and early 2018 to be “exciting for the progression of property technology” with lots of M&A activity.

LendingCrowd launches Refer a Friend promotion (AltFi), Rated: A

LendingCrowd, the peer-to-peer (P2P) lender, has launched a £50 “refer a friend” promotion as it continues to experience strong demand from borrowers across the UK.

Following a record quarter for new loans and the rising popularity of its tax-free* Innovative ISA (IFISA) accounts, investors on the P2P lending platform will be given a £50 bonus when each friend they refer invests at least £2,000. Each friend will also receive a £50 referral reward.

China

China’s Qudian IPO seen priced above range (Reuters), Rated: AAA

Online micro-credit provider Qudian Inc’s (QD.N) initial public offering could be priced above the expected range of $19-$22 per American depositary share, sources familiar with the matter told Reuters.

The offering could give the company, backed by Alibaba’s (BABA.N) banking unit Ant Financial, a market capitalization of more than $7 billion and raise over $825 million.

Party On, Chinese Consumers (Bloomberg), Rated: AAA

Qudian Inc., operator of a loan platform for consumers and small businesses, jumped 22 percent on its New York trading debut Wednesday. The Beijing-based company raised $900 million in an initial public offering on the eve of China’s 19th party congress, pricing its shares above the high end of its indicative range. It’s the largest U.S. listing by a Chinese company since the $1.4 billion sale by logistics company ZTO Express (Cayman) Inc. in September 2016.

Qudian’s experience stands in sharp contrast to that of China Rapid Finance Ltd., a peer-to-peer consumer lender. In April, China Rapid Finance managed to raise only $60 million, having priced at the bottom end of its range. Since then, though, the shares have soared more than 90 percent, with most of the gain coming this month. Similarly, the October rally has brought the advance for Beijing-based consumer finance company Yirendai Ltd. to 150 percent this year.

Source: Bloomberg

Looking at Qudian’s financials, one can’t help the bullish feeling that China’s consumer credit market is only in its early stages. Qudian’s rate of loan delinquencies, defined as those over 30 days past due, is only 0.5 percent or less this year, according to the company, which relies on Alibaba Group Holding Ltd.’s Ant Financial affiliate for new borrowers and credit rating services.

Source: Bloomberg

The Young and the Leveraged (BreakingViews), Rated: A

Betting on China’s next generation of borrowers just got easier. Qudian, an online microlender backed by e-commerce giant Alibaba’s financial unit, priced its U.S. listing above its expected range on Tuesday, says Reuters. It offers fast growth, low default rates and, unlike many tech startups, is already profitable. At $24 per share, the final price represents a 2018 PE of 13.8, compared to 13.0 for smaller U.S.-listed online lender Yirendai.

China’s household debt relative to income is still low, and consumer credit is underpenetrated at 7 percent of gross domestic product, versus 20 percent in the United States, says Goldman Sachs. The investment bank expects outstanding consumer credit excluding mortgages to more than double to $1.9 trillion by 2020.

Qudian focuses on the younger segment of this market, providing small, short-term loans for ordinary purchases.

Source: BreakingViews

The truth about Ant Financial … (The Finanser), Rated: AAA

A key theme in the new book is financial inclusion and, to those ends, I made a visit to Hangzhou, China, to meet the executive team of Ant Financial.

As Americans struggle with the pains of Chip & PIN and Europeans embrace contactless payments, China has leap-frogged us all. In 2016, Chinese consumers spent $5.5 trillion through their mobile apps. That’s more than any other economy and many predict that China will be first major economy to be completely cashless. The chosen mobile payment system for most Chinese citizens is Alipay, and the company has recently started to expand its footprint globally.

Many of you may have heard of Alipay, but it is not the Chinese version of PayPal, as many think. In fact, it bears no relationship or resemblance to anything we see in Europe or America. It is distinctly Chinese and, having been born out of a need to trade, is now moving towards global dominance.

How far things have changed, in that today’s Alipay monitors every transaction from its 450 million users, in real-time with artificial intelligence monitors constantly searching for potentially fraudulent transactions. That is a far cry from where they started, but then the company has refreshed its systems architecture four times in the last twelve years and has just embarked in another refresh. They moved from basic escrow services to real-time payments to cloud to microservices, and are now working on their new machine learning and super intelligent structure. A structure that can process 250,000 transactions per second today, and is architecting systems that will scale to over 100 billion transactions per day. To put that in perspective, Visa and MasterCard handle just over 60 billion transactions per year combined, and average near 2,000 transactions per second.

Source: The Finanser

China: The frontier of networked money (SupChina), Rated: A

In the last two years, China has gone from a country without credit cards to a cashless society where even beggars use mobile phones to accept payments.

The number of P2P companies has been reduced through attrition and government regulation, and a few strong players are emerging:

  • Caixin reports (paywall) that P2P platform PPDAI Group has announced plans “to raise up to $350 million through a New York initial public offering (IPO).
  • In September, online-only insurer ZhongAn Online P&C Insurance raised $1.5 billion in an IPO on the Hong Kong Stock Exchange.
  • The South China Morning Post reports that shares of Qudian, a leading online consumer credit provider, “surged nearly 46 percent to US$35 on its debut trading on the New York Stock Exchange on Wednesday morning.” Aside from fierce competition in the sector, the SCMP says that “Qudian has one other worry — potential competition with its principal shareholder Ant Financial,” which is, like the SCMP itself, an Alibaba affiliate.
International

IBM and eight banks unleash we.trade platform for blockchain-powered commerce (Banking Technology), Rated: AAA

Since January 2017, a group of seven banks (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and UniCredit), together with IBM, have been developing the Digital Trade Chain platform.

Now with the recent addition of Banco Santander as a founding partner, the group have decided to rebrand the Digital Trade Chain platform to we.trade.

Banks Start Broad Use of Blockchain, as JP Morgan, IBM Lead Way (DarkReading), Rated: A

Two major players announced cross-border payment networks built on blockchain technologies Monday, and more financial services will follow soon, despite opinions about Bitcoin.

The distributed ledger technology that underpins cryptocurrency like Bitcoin is rapidly going mainstream. Blockchain is building a tremendous amount of buzz as technology and financial industry heavyweights and startups race to apply the technology in innovative new applications for the banking sector. Their efforts are starting to bear fruit in the area of cross-border payments, as three separate announcements from IBM, J.P. Morgan, and Bank of Canada highlighted this week.

The ultimate goal is to provide a secure, speedy and transparent financial platform between global markets that may have found it difficult to do business with one another due to the bureaucratic pitfalls of legacy international payment networks.

The developments this week underline that banking executives are increasingly seeing the upside of combining distributed ledgers with solid cryptographic applications for new means of facilitating payments, trades, contracts, and transactions of all stripes.

Six courses that will get you clued up on fintech (CNBC), Rated: B

New York University’s Stern School of Business has a number of courses on fintech that consider innovations in the sector, regulatory challenges and opportunities for growth.

Students have the option to learn about digital currencies, blockchain, robo advisors, personal finance and payments.

The U.K.’s Oxford University, ranked by Times Higher Education as the number one institution in the world, made its fintech debut this month.

Oxford’s Saïd Business School launched the Oxford Fintech Programme in collaboration with GetSmarter, which is owned by education tech giant 2U Inc.

Students on the course study a range of subjects within the fintech sector, including digital payments, regulatory technology, blockchain and artificial intelligence.

Imperial College London is another British university to have its own course dedicated to all things fintech.

Imperial’s ‘Fintech — Innovative Banking’ course focuses on three key areas of the industry: blockchain, digital identity and digital money and payments.

India

P2P lending platforms can put downward pressure on interest rates (livemint), Rated: AAA

Mint Money spoke to Rajat Gandhi, founder and chief executive officer of Faircent, a P2P marketplace which has been in operations since 2014, on his vision for the nascent industry in India.

Now that the RBI has given NBFC status to P2P platforms and has also come out with guidelines for the sector, what is the way ahead?

Most of the guidelines also are in line with the industry expectations, just that there are a few grey areas where we would need some more clarifications. The way I see it, the RBI document is a framework, rather than hard guidelines.

In the short term, we all have to file our applications and get certifications in place.

The P2P lending process was legitimate; the RBI framework has just validated it further. An important development is that the framework has created a redressal system— both for the borrower and the lender. While a lot of obligations will be on the platforms, there is also a lot of clarity now on our roles and responsibilities.

How do the RBI guidelines help a consumer, borrower or lender? 

The guidelines basically tell the lender particularly what they are getting into, including the fact that the principal is not protected. We as companies should also keep telling them. Because the moment an investor hears interest rate, the immediate thought is assured returns.

Secondly, the guidelines have unlocked the supply side. Borrowing till now was restricted to banks and NBFCs, which have stringent guidelines. Whereas out here, this is an exchange model and the P2P platforms cannot lend from their own balance sheet, so the platform’s returns become interest rate agnostic. Their role is only to rate and price the borrowers, and as a platform, we do not directly benefit from this rating and pricing.

If a P2P platform is interest rate agnostic, what is your business model and how does your business make money?

Basically, we charge 1% from the lender and 2-4% from the borrower, of the loan disbursed.

The guidelines also talk about P2P platforms giving services to lenders for recovery of loans. How does that work?

We have a panel of lawyers who will take up the matter on behalf of the lenders. This is charged as this is a separate service.

What is the size of P2P lending industry in India at present? 

The size right now will be roughly around (RS) 50-60 crores on an annualised basis.

Fresh funding to enable LenDenClub meet capital requirement set by RBI (India.com), Rated: A

After a successful growth stint in the past six months, LenDenClub, a P2P lending platform is looking to meet the capital requirement set by the Reserve Bank of India (RBI) regulations, banking on the newly secured capital which is being used to enhance the product platform and improve tech automation.

Earlier this month, the firm closed a USD 500,000 pre-series A round from a fund based out of Mumbai.

Kotak Bank ties up with Samsung Pay (India Times), Rated: B

Private sector lender Kotak Mahindra Bank today said its credit and debit card holders will be able to tap and pay using smartphones at merchant establishments.

The city-based lender has tied up with Samsung, under which its cardholders will be able to tap and pay using smartphones of the Korean electronics major having the Samsung Pay acceptance machines, a bank statement said.

PayPal bets big on India’s FinTech boom (Ogilvy), Rated: B

Financial transaction company PayPal has long been a supporter of innovation in India, having set up an incubator programme there to support local start-ups. And now, the company is evolving its partnerships with the start-ups that join the incubator, taking equity in participating firms.

Asia

Fintech startup Finja breaks new ground in Pakistan with $ 1.5m series A funding (Tech in Asia), Rated: A

The catalyst for ecommerce and other internet businesses to flourish in China, India, and Southeast Asia is digital payments. This in turn has a multiplier effect on economic growth.

That’s why today’s announcement of US$1.5 million series A funding for Pakistani fintech startup Finja is notable. More so, because Swedish investment company Vostok led the round – the Pakistan startup ecosystem rarely hits headlines for attracting international investment. Dubai-headquartered Gray Mackenzie Engineering Services also participated in the round.

Finja is giving a push to digital payments in Pakistan with its SimSim wallet.

Finja claims SimSim has been doubling its mobile wallets every month to notch up 80,000 accounts since it went live a few months ago. It has clocked transactions worth a total of US$14 million so far.

Danadidik, the platform that helps Indonesian students fund their study, raises seed funding (e27), Rated: A

Indonesian student loan platform Danadidik announced on Wednesday that it has raised an undisclosed seed funding round from Singapore-based impact investment fund Garden Impact Investments.

Danadidik Co-Founder and CEO Dipo Satria said that the new funding will be focussed on hiring, product development, and marketing.

He also stated that for the year 2018, the South Jakarta-based startup plans to launch its mobile app and is targeting to fund 2,000 students.

MENA

Abu Dhabi Inks FinTech Development Pact with Mastercard (Cryptocoins News), Rated: A

Abu Dhabi’s international financial center has entered a collaboration with payments giant Mastercard to develop and accelerate FinTech solutions in the region.

The Abu Dhabi Global Market (ADGM), an international financial center established by a UAE Federal Decree to develop and strengthen financial services in Dubai as a global center for business and finance, is partnering Mastercard to develop FinTech activities in UAE’s capital and the wider MENA (The Middle East North Africa) region.

Latin America

Amid Brazil’s persistent economic crisis, fintech startup GuiaBolso raises $ 39 million (TechCrunch), Rated: AAA

Despite a continuing economic crisis, Brazil’s technology startups are continuing to attract cash and financing, with the mobile personal financial service GuiaBolso raising $39 million in fresh funding.

The new round was led by Vostok Emerging Finance, a publicly traded Swedish fund with its roots in big Russian private equity. Additional investors include Ribbit Capital, the International Finance Corp. and QED Investors, while impact investment firms Endeavor Catalyst and the Omidyar Network also participated.

Authors:

George Popescu
Allen Taylor